USPS reports FY 2016 second quarter results: operating profit (before PAEA charges) reaches $1.8B year to date

The US Postal Service reported its second quarter financial results today. For the period from January 1 to March 31, the USPS had a net operating profit (aka “controllable income” of $576 million. That brings the year to date profit (excluding PAEA accounting adjustments) to just over $1.8 billion.

Here is the full summary issued by the USPS:

  • Operating revenue grew 4.7 percent to $17.7 billion
  • Controllable income totaled $576 million; net loss of $2.0 billion reported
  • Postal Service revenue benefited from exigent surcharge, which expired on April 10, 2016
  • Legislative reform and focus on innovation and efficiency remain necessary

WASHINGTON — The U.S. Postal Service reported operating revenue of $17.7 billion for the second quarter of fiscal year 2016 (January 1, 2016 – March 31, 2016), an increase of $788 million or 4.7 percent over the same period last year. The increase was primarily due to an 11.4 percent increase in Shipping and Package volume and pricing strategies.

“While we have been successful in achieving controllable income during the quarter, we are still reporting net losses and contending with long-term financial challenges,” said Postmaster General and Chief Executive Officer Megan J. Brennan. “We continue to focus on improving operating efficiencies, speeding the pace of innovation, and increasing revenues for the Postal Service.”

Controllable income for the quarter was $576 million compared to $313 million for the same period last year. Calculation of controllable income takes into account the impact of operational expenses including compensation, benefits and work hours; but does not reflect factors such as the legally-mandated expense to prefund retiree health benefits (see Non-GAAP Financial Measures table on following page for full description).

Net loss for the quarter was $2.0 billion compared to $1.5 billion for the same period last year. The change in net loss was most significantly impacted by a $547 million unfavorable change in the workers’ compensation expense as a result of interest rate changes – a factor outside of management’s control.

Operating expenses also increased in the second quarter compared to the same period last year, driven by increased work hours and transportation expenses due in large part to the increase in package volume. Labor costs increased by $362 million, and transportation expense increased by approximately $149 million.

“During the second quarter, we expanded work hours and our transportation network, taking more trips and increasing miles flown,” said Chief Financial Officer and Executive Vice President Joseph Corbett. “This largely resulted from strategic business decisions enacted to accommodate package growth and enhance service across the country.”

“I am grateful to our dedicated employees who helped us to achieve controllable income this quarter, but we cannot let this result mask the financial challenges we face,” said Brennan. “Our financial situation is serious, but solvable. We are confident that we can return to financial stability through the enactment of prudent legislative reform and a favorable resolution of the upcoming regulatory review of our rate-setting system.”

Selected Second Quarter 2016 Results of Operations Compared to Same Period Last Year
The following table presents certain selected results of operations for the three months ended March 31, 2016 and 2015:

* The three months ended March 31, 2016 had one additional business day compared to the same period in 2015.

Non-GAAP Financial Measures
Included in this news release is controllable income, which is not calculated and presented in accordance with accounting principles generally accepted in the United States (GAAP). Controllable income is a non-GAAP financial measure defined as net income subtracting operating expenses considered outside of management’s control. These expenses include the mandated prefunding of retirement health benefits, actuarial revaluation of retirement liabilities and non-cash workers’ compensation adjustments.

The following table reconciles GAAP net loss to controllable income and illustrates the income from ongoing business activities without the impact of non-controllable items for the three months ended March 31, 2016 and 2015:


1 This is a net amount that includes changes in assumptions as well as the valuation of new claims and revaluation of existing claims.

2 Determined by OPM in 2015 to amortize the $3.5 billion unfunded FERS retirement obligation based on actuarial valuations and assumptions. The payments are to be made in equal installments over the next 30 years. The 2015 expense of $241 million was recorded in full during the fourth quarter of 2015.

Complete financial results are available in the Form 10-Q, available at

Financial Briefing
Postmaster General and CEO Megan J. Brennan and Chief Financial Officer and Executive Vice President Joseph Corbett will host a telephone/Web conference call to discuss the financial results in more detail. The call will begin at 9:30 am on May 10, 2016 ET and is open to news media and all other interested parties.

Should We Bring Back The Postal Banking System?


By Mary Kate Leahy via Law Street Media

If you are tempted to take out a payday loan you might want to take Sarah Silverman’s advice and try literally anything else. The trouble is, there are rarely other options and here in the United States there are 40 million Americans who are “unbanked,” without access to the formal financial system. Shockingly, these Americans spend the same amount just to use their own money as they do to purchasing food–10 percent of their income.

Payday loans may be an evil but unless and until they are replaced with a better alternative they continue to be a necessary one. Eliminating payday lenders would prevent borrowers from taking on that particular pernicious type of debt but does not solve the underlying concern that many unbanked Americans do not have access to credit.

One of the proposed solutions to provide access to banking services for the unbanked is to use the United States Postal Service. Progressive politicians are advocating this method as an efficient way to reach low-income citizens in their neighborhoods. But some are uncomfortable with a government agency, one which is facing some financial difficulties of its own, taking on a problem that should be dealt with by market forces.

So is the existence of the “unbanked” really a problem? If so should we be using the post office to combat it?

A Solution for the Unbanked?

For a primer on the issue of how many Americans are currently unbanked and would benefit from an alternative to payday loans, check out this TedTalk by Mehrsa Baradaran.

As Baradaran explains, postal banks are actually something we already had and used to great success. From 1910 to 1966, the U.S. Postal Savings system provided a place for Americans to deposit funds in order to save money and have a way of paying their bills other than with cash. That is one of the chief problems facing the unbanked–the inability to have easy access to their own money and the high percentage of their money spent on just using their own funds. Paying a fee to access your own money or even just check your account balance is a significant financial burden and a service that the banked get access to for free.

With the advent of community banks, which offered a more attractive interest rate to depositors, the postal banking system seemed unnecessary and was eventually abolished in 1966. But the community banks–which were also proposed as a solution to the problem of the unbanked–removed themselves from low-income neighborhoods and contracted the number of people they provided services for. Nature abhors a vacuum and payday lenders went into that space, which is why people in low-income neighborhoods are often forced to rely on these types of lenders as substitutions for the banking services that the banked take for granted.

For the unbanked, there is simply not a banking location that they can go to. And one of the beauties of using the postal system for banking is that convenient locations already exist. Fifty-nine percent of post offices are in zip codes where there is either zero or only one bank. Other industrialized nations already have postal banking. In the U.K., the postal service does not actually provide financial services but allows third-party providers (like the Bank of Ireland) to conduct business there. France has actually converted its postal service into a financial institution.

The postal banking systems have been imperfect. In Japan, the postal banking system drew heavy criticism for its inefficiency. Yet 80 percent of Japanese citizens over the age of 15 had a postal bank account. China and India are also seeking ways to increase micro-lending and financial services to their nations’ poor through the use of postal banking services.

Potential Concerns

The concerns regarding postal banking fall into two main camps. First, there is the question of whether a postal banking system would help and whether the U.S. Postal Service could operate it efficiently and fairly. The second concern is less a practical question of ability and more an assessment of whether we want to use the postal service to promote a specific financial ideology.

The U.S. Postal Service seems to think it would be able to provide this service. The American Postal Workers’ Union makes the argument that postal workers are already in the very places that community banks have abandoned and they currently provide some financial services, like money orders. They would be able to provide small loans as well–like a payday lender but without extremely high interest rates.

The video below outlines the case made by the American Postal Workers’ Union for postal banks.

But the argument goes beyond the mere logistics of whether post offices can provide these services. The core concern is whether they should. Whether we want a government institution to be providing a service that is traditionally left to the private sector. After all, should the government really be involved in trying to undercut the payday lending industry based on a largely moral argument about “fairness”?

True Competition

The private sector might argue that payday lending is actually fair. It provides a needed service–credit–at a rate that people are willing to pay. With so many of these financial institutions out there it is hard to argue that the industry is not competitive and given that these rates are still being accepted by many borrowers that must be what the credit is worth.

But that argument may misconstrue what true competition, one that will actually produce a fair price for something in a healthy market, consists of. Critics of payday lending would argue that true competition involves choices between meaningfully different options, not the illusion of choice between virtually identical competitors. A person living in an area where there are 10 payday lenders and no banks is not truly living in a competitive market. The individual lenders may vary their terms slightly but from the perspective of the borrower, they are still going to have to choose a payday lender. QuickCash versus KwikKash does not, at the end of the day, matter very much to the borrower or to the pernicious effects of the system.

The implementation of postal banking would provide meaningful choices to borrowers and create a true alternative to the payday lending industry. Then, when faced with that actual competition, they will be forced to either adapt or die. If a 400 percent interest rate really is a reasonable price to pay for the service they are offering then payday lending will survive the introduction of postal banking.

When you discuss postal banking there are two main ways that it can be structured–a postal bank that provides access to credit and one that does not. In the past, postal banks did not provide the type of micro-loans that would compete with payday loans. While a modern version of the postal bank could include small loans it doesn’t necessarily need to. Postal banks can provide other valuable services; most importantly post offices can serve as a place to save and access your money. If postal banking was re-instituted without lending, it would likely go a long way in solving the problem of access for the unbanked and underbanked.

Currently, people who live in a community where there is no bank have three main options to cash their paycheck. Payday loan providers that usually charge a 10 percent fee, check cashing services (some are part of larger retailers like Walmart) that typically charge lower a flat fee, and prepaid card accounts that allow you to deposit your money into the account but then charge a monthly fee for you to use the card. Those of us with bank accounts can get all of these services for free.

The Government’s Role

Postal banking would, of course, involve the government taking on a role that is now filled by the private sector. One fear is that this will stop the development of private sector alternatives to payday lending and stifle innovation in the provision of financial services. We may hate payday lending, but many feel that if it is going to be replaced that should be done by the private sector–through innovation in technology or some other form of financial institution. The government’s role should be contained to regulating industries, not replacing them.

But the postal bank did not, when it existed, kill other banks. In fact, the opposite happened. The rate of interest for the postal banks was capped at 2.5 percent to weaken its ability to compete with other banks. When community banks offered better rates, not surprisingly, depositors moved there–choosing a private sector institution that they felt better suited their needs. Postal banking also would not eliminate advances in technology and electronic banking. Those advances are driven by thinking of better ways to provide services to already banked people.  Applications that transfer money instantly between bank accounts for a minimal fee on your smartphone only benefit people who have smartphones and bank accounts. To the unbanked, these advances are meaningless–21st-century innovations in banking don’t assist people who are still stuck in the 20th. Creating a postal banking system would help the millions of unbanked Americans enter into the formal financial system, but it may not have much effect on companies seeking to further cater to those who are already included.


Postal banking may seem to some like a governmental overreach into an arena where the forces of the market should be in charge. Undercutting a private sector industry in favor of a government run charity-bank makes some people uncomfortable. Some may ask where we should draw the line between public good and social engineering. But postal banking already worked once in our nation’s history. And while it is not a complete solution to the problem of the unbanked and underbanked it could be used as part of that solution.

McCaskill: Is USPS undercharging FedEx and UPS?

WASHINGTON – U.S. Senator Claire McCaskill today questioned the U.S. Postal Service’s pricing for its “last mile” of delivery in rural areas, and why she believes it may be losing money by under-charging competitors such as UPS and Fedex to carry mail to those areas.

“I have been on a harangue about giving deals to our competitors,” said McCaskill, a former Missouri State Auditor and senior member of the Senate Homeland Security and Governmental Affairs Committee, which has jurisdiction over the Postal Service. “…We are giving a really good deal to our competitors. I’ve never seen another business entity who says, because we are so starving for volume, we’re going to take the most expensive part of our architecture, which is the last mile, and we’re going to give our competitors a deal on that last mile. And I have yet to have anyone give me the analysis that shows me that they have, in fact, at the Postal Service, considered what price they’re giving to UPS and FedEx for that last mile of delivery as it relates to our costs.”

In January, McCaskill demanded answers from the Postal Service on how it will protect mail delivery for rural Missourians and efficiently manage the cost-sharing benefits with competitors to carry mail the “last mile,” especially in rural areas, saying: “I think it’s really important we get a handle on [rural delivery times]. Those of us who are really pushing to protect rural delivery…think it’s important we know what we’re working with from a data-driven basis.”

In 2014, McCaskill asked the Government Accountability Office to look at these agreements, and the agency confirmed some of her concerns when they discovered the Postal Service wasn’t accounting for key cost-drivers such as package size and weight when making agreements, and wasn’t collecting some of the revenue it was owed from the deals.

McCaskill, a longtime advocate for postal service in rural communities, is widely credited with having waged a successful campaign over several years to save rural post offices and maintain delivery times when faced with closures and the slowing of standards.

McCaskill recently backed the Rural Postal Act, a bill that aims to improve postal service, delivery times, and standards in rural communities that have been disproportionately affected by cuts to the Postal Service. The bill—sponsored by Senator Heidi Heitkamp of North Dakota and also cosponsored by Jon Tester of Montana—would restore overnight delivery, return a faster First-Class mail standard, make six-day delivery permanent, and enact strict criteria the Postal Service would have to meet before closing a post office to ensure that rural communities are still able to easily access the mail system.

Last year McCaskill requested an examination of the interaction between the lack of adequate access to broadband technology in rural areas and the reliability of Postal Service delivery. Without efficient and effective mail service as a result of recent Postal Service consolidations, rural Missourians are put at an economic and communications disadvantage, the effects of which haven’t yet been properly studied. McCaskill also recently signed on to a request for the federal government’s top watchdog to review the Postal Service’s calculation of delivery times and standards, and she helped win a one-year moratorium on postal closings until the impact of those closings is fully understood.

The Disappearing Post Offices of the Rural South

When she needs a break from photography or from teaching art at Lincoln Memorial University, Rachel Boillot hangs out with an older crowd.

“I spend Saturday nights with 95-year-old women,” she said.

Part of that has to do with another job Boillot has: She’s the assistant producer at arecord label that represents old-time folk musicians. It’s also a photography project, “Silent Ballad,” about traditional musicians from the Tennessee Cumberland Mountains. She finds it refreshing to be a part of such an interesting circle of people.

“They have great stories to tell,” she said. “I’m learning so much and being shaped by tough people who grew up during the depression in Appalachia and they’ve let me into their homes and shared their most intimate stories with me. It has been a powerful experience.”

It’s fair to say Boillot is interested in traditions, regardless of their genre, and she has an affinity for history even as she watches it become outdated. During her four years of undergraduate study at Tufts University’s Museum School, Boillot said she spent countless hours training to be a darkroom printer; as she was working on her senior thesis, the printer was discontinued. When she headed to Duke University in 2012 to begin her MFA, Boillot, a film shooter, read an article about a number of post offices that were closing.

“I was kind of shocked,” she said. “I never thought about it growing up; they’re ubiquitous in our landscape and I never thought about them not existing.”

She was interested in the closings but hadn’t thought about creating a photography project about them; once she arrived at Duke, the parallel between the post offices and her love of film photography came into focus.

“I'm acutely aware of the transition from analog to digital,” she said. “I’m aware of these changes in my own practice but also how they’re shaping us as a society. Technology changes quickly and it defines the way we think and communicate and how we make art; that was my initial interest and part of why I stayed committed to this.”

Once in North Carolina, she started what would become the series “Post Script” by meeting up and tagging along with a letter carrier as she worked her route.  

Over the next two years, during spring and summer breaks, Boillot mapped out trips throughout the South that included the most threatened zip codes, sometimes using community organizers as guides, other times trying to find the locations on her own.

Boillot says her photographic influences often come from literature and music. For the series “Post Script” Eudora Welty became a muse, specifically her correspondence with William Maxwell and also her story Why I live at the P.O.

“I fell in love with her voice,” Boillot said. “Her characters sort of became shoes I could wear as I was exploring the new regions. … Why I live at the P.O. is perhaps the best creative work ever to unfold in the rural post office.”

As Boillot explored the 11 traditional Southern states, she discovered that although some people were saddened—or inconvenienced—by a post office closing, other people didn’t really care and were happy to “get the building back.” Her series became not only about the post offices themselves, but also about the geography and people who make up the area.

“For me, the post office became my introduction to the rural South, which is a region I fell in love with,” she said.

Boillot was strict with herself, shooting for one year and then spending the next working on a solo show, her graduate thesis and a self-published book of the work. After graduation, Boillot moved to her current home in Cumberland Gap, Tennessee, where they have “a post office, two coffee shops, two restaurants, and that’s it folks.”

Although she is currently working on finishing her new work on folk traditions, she said images of post offices continue to sneak into the work. Although her subjects and method of shooting is rapidly becoming part of history, Boillot feels her work is similar to the ways in which Welty’s words resonated with her.

“Reading her letters I realized photographs are letters, objects captured and distilled in one form that travel across time and space and are open to interpretation in someone else’s hands that take on a distinct meaning each time someone engages with them. Each time you take a picture, it’s like you’re sending off a message in a bottle.”

Boillot’s work will be shown at SUNY Old Westbury in Long Island from April 4 through May 5 and at the Half King Gallery in New York starting July 19.

Originally Posted on Slate by David Rosenberg

Important: USPS Leases

The USPS is creating language in leases that looks similar to previous form leases so that owners will not detect dubious attempts to ruin the market value of their post office investments.

There are two areas to note:


Never give the USPS the right, under any circumstance or condition, to purchase your facility.  This way, you will not have to worry about them stealing the building way below the actual market value.


On the second page of your lease, there is normally a clause for "other provisions".  The language of the Services & Equipment rider regarding electricity and the sewer provision is especially troublesome.  It appears that we can no longer trust the USPS to negotiate in an open and fair manner.

Watch out for these changes and send us a copy of each lease you receive from the USPS so we can point out the faults.

Post Office Closures

In Rhinebeck, NY - the home of American Postal Owners - the post office is USPS owned.  Although it serves well over 10,000 people, the hours are being reduced from 8:30am-7pm to 9am-5pm.  When purchasing post offices, people often strongly consider the hours of operation; however, this is clearly no longer a true indicator of a property's business.

Do not allow other associations to scare you into selling your existing properties at an unfair price or prevent you from investing in new properties.  The closing and consolidations have to do with branch offices in large cities and large processing and distribution centers.

Keep this in mind if you are concerned about the USPS closing small rural post offices: under a federal law aimed at ensuring service for rural and remote areas, economizing cannot be the sole factor for closing a post office. 

The Post Office Ain't Broken. It's in Profit, So Why "Fix" It?

The U.S. Postal Service is older than the country itself, delivers to 153 million homes and businesses six and increasingly seven days a week and consistently ranks as the public’s most trusted federal agency.

Yet misinformation about it abounds, including in the commentary by James Gattuso about the Postal Service’s recent financial report for Fiscal Year 2015. The piece painted an unrelentingly negative picture of postal finances while referring frequently to a possible taxpayer bailout. 

In fact, the USPS annual report detailed not only challenges but also several highly positive trends. It illustrated that the past fiscal year yielded a $1.2 billion operating profit—the second consecutive year that revenue earned delivering the mail exceeded the costs of delivering the mail by more than $1 billion. And it’s the third straight year that postal operations have been in the black—with $2.9 billion in total operating profits over that period.

All this, mind you, without a dime of taxpayer money. For decades the USPS has by law relied on the revenue it earns.

These impressive performances are no fluke; rather, they’re based on structural factors. Following the worst recession in 80 years, mail fell sharply, dropping 10 percent in 2009 alone. But as the economy gradually improves, letter revenue has stabilized. Meanwhile, with online shopping growing because of the Internet, package revenue is skyrocketing—which augurs well for the future. In fiscal 2015, package revenue increased by 11.4 percent over the prior year.

The timing of the good news contained in the report couldn't be better, with the holidays approaching. The Postal Service projects the delivery of 15.5 billion cards, letters and packages from Thanksgiving to New Year’s Eve—including a record 600 million packages.

It’s also true that the Postal Service faces challenges; albeit not as often pictured. The major one has nothing to do with the mail and everything to do with congressional politics.

In 2006, a lame-duck Congress mandated that the Postal Service pre-fund retiree health benefits. No other agency or company in the country has to pre-fund for even one year; the Postal Service must pre-fund 75 years' worth of these benefits in advance. That $5.6 billion annual charge is the “red ink.”

Without this unique and unfair burden, the narrative would be as follows: Here’s a government entity that, with no taxpayer money, and faced with a still soft economy plus the growing reach of the Internet, once again earned a billion dollar-plus operating profit.

To be sure, pre-funding isn’t the only challenge the Postal Service faces. The rise of online bill-paying and of e-mail clearly have had an impact on mail volume. But, as noted, the Internet also offers opportunities, such as the growth in online shopping and thus in package deliveries.

Removing the artificial financial crisis produced by pre-funding would allow the postal community to focus its energies on how best to address changing communications practices while maximizing the new opportunities.

The path proposed by some critics—degrading the now-profitable postal networks and slowing the mail—is both illogical and counterproductive. Why begin to dismantle services and networks that are increasingly profitable? That would ignore the actual cause of the red ink while hurting Americans and their businesses—and it also would weaken the Postal Service’s bottom line by driving mail and revenue away.

The Postal Service historically hasn’t been—and shouldn’t be now—a partisan issue. Many Democrats support the mission of the Postal Service, and some of the agency’s strongest backers are conservative Republicans—for good reason.

The Postal Service is based in the Constitution. It’s critical for businesses and rural areas. It’s the country’s largest civilian employer of military veterans. It’s the centerpiece of a $1.3 trillion mailing industry that employs 7.5 million Americans in the private sector.

Letter carriers boost communities and families through such volunteer actions as conducting the nation’s largest single-day food drive or by sometimes saving lives on the route.

And the universal network also is invaluable in ways few people consider. For example, when then-President George W. Bush looked for ways after 9/11 to protect metropolitan areas in the event of a biological attack, he turned to the nation’s only universal delivery network.

On a volunteer basis, letter carriers in several major metro areas have been trained and equipped to deliver medicines to every household within 48 hours of an attack—to avert panic and reduce casualties. Just imagine what it would cost to set up such a program from scratch.

If lawmakers address the pre-funding fiasco they created while strengthening the invaluable—and profitable —postal networks, the Postal Service can continue to provide Americans and their businesses with the industrial world’s most-affordable delivery network.

What the OIG Recommended

OIG Report Recommends Ending Exclusive Relationship with CBR

We recommended management terminate and recompete the current real estate services contract.  In addition, we recommended management, in the interim, modify the CBRE contract to prohibit CBRE from collecting commissions from opposing parties and prohibit dual agency representation.  We also recommended management, in the interim, notify lessors that they are not required to pay commissions. 

We also recommended management train employees to comply with the requirement to review appraisals independent of CBRE and implement revisions to the appraisal review checklist to ensure it is sufficient to detect technical errors in appraisals.  

Further, we recommended that management update record management requirements, implement Postal Service policy that requires employees to consistently enter real estate transactions into the facilities management system, and instruct the contracting officer to ensure the proper certification of payment authorizations.

House Panel Votes Relief for Postal Service

The House Oversight and Government Reform Committee voted Friday to approve HR 22, which would save the U.S. Postal Service $2.3 billion this year in health care costs.  The bill allows the Postal Service to pay health care premiums for its current retirees using a trust fund designated for future retirees.  Without the bill, the Postal Service would have to make a $2.3 billion payment in September for its current retirees; postal officials say they cannot pay that bill.  

"The Postal Service is facing a financial emergency," said Rep. Edolphus Towns, D-N.Y., the committee chairman.  "HR 22 would allow the Postal Service to live to fight another day."

HR 22 was introduced in January and then spent almost six months before the committee.  The bill now heads to the full House for a vote.  Passage is almost guaranteed: the bill has 337 co-sponsors.

Latest News on Closings

Outbound Mail: USPS Targets Thousands of Branches for Closure

Post Office Looking at Consolidation of 3,243 of its 4,851 LARGEST Branches and Stations

The news of U.S. Postal Service (USPS) closures has been trickling out in local communities. But a closer examination behind the reports finds the potential for a major flood of closings. The Postal Service sent a notice to American Postal Workers Union executives this summer that it was considering consolidation options in every major metro market in the country and would consider closing 3,243 of its 4,851 largest branches and centers in the review process. The markets have been identified, the exact locations have not - although the USPS has already stamped almost one-fourth of the ones it has studied as disposable, according to postal union officials. The review process was to last most of the summer (or more if Congress gets involved, and you know they will) but they want the consolidation to occur by October 2010.

According to USPS records, it owns 8,546 facilities totaling 219.6 million square feet and leases another 25,272 locations totaling 912.2 million square feet. Many, if not most, of those locations are counters in various retail locations occupying less than 1,000 square feet. The consolidations the USPS are studying are for larger locations of a few thousand to tens of thousands of square feet - most of it leased

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