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A Quick Postal Update

A Quick Postal Update. AMSP Southwest Chapter Meeting Houston, TX April 6, 2013. USPS Business. “Too big to fail.”

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A Quick Postal Update

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  1. A Quick Postal Update AMSPSouthwest Chapter Meeting Houston, TX April 6, 2013

  2. USPS Business “Too big to fail.” The idea that a business has become so large and ingrained in the economy that a government will provide assistance to prevent its failure. “Too big to fail” describes the belief that if an enormous company fails, it will have a disastrous ripple effect throughout the economy. – Investopedia

  3. USPS Business

  4. USPS Business • Shares of revenue and volume (FY2010)

  5. USPS Business • Shares of revenue and volume (FY2011)

  6. USPS Business • Shares of revenue and volume (FY2012)

  7. USPS Business • Mail volume and revenue trend

  8. USPS Business • FY 2012 projections • Revenue – $64.0 billion (-$1.7 billion) • Operating loss of $3.0 billion, net loss of$14.1 billion (including $11.1 billion prefunding payments for 2011 and 2012) • Operating expenses: $67.9 billion (-$900 million) • Volume – 158.0 billion pieces (-9.9 billion pieces, -5.9%) • First-Class Mail: loss of 6.3 billion pieces, -8.6% • Standard Mail: loss of 3.2 billion pieces, -3.8%

  9. USPS Business • FY 2012 projections • Revenue – $64.0 billion (-$1.7 billion) • Operating loss of $3.0 billion, net loss of$14.1 billion (including $11.1 billion prefunding payments for 2011 and 2012) • Operating expenses: $67.9 billion (-$900 million) • Volume – 158.0 billion pieces (-9.9 billion pieces, -5.9%) • First-Class Mail: loss of 6.3 billion pieces, -8.6% • Standard Mail: loss of 3.2 billion pieces, -3.8% • FY 2012 actual • Revenue – $65.2 billion (+1.9% plan, -0.8% SPLY) • Operating loss of $2.2 billion, net loss of $15.9 billion (including $11.1 billion prefunding payments for 2011 and 2012) • Operating expenses: $67.5 billion (-$1.3 billion) • Volume – 159.9 billion pieces (+1.2% plan, -5.0% SPLY) • First-Class Mail: 69.6 billion pieces (loss of 4.1 billion pieces, -5.6%) • Standard Mail: 79.8 billion pieces (loss of 4.9 billion pieces, -5.8%)

  10. USPS Business • How things change • Overall decline 2005-2012 • Volume: -28.98% • Revenue: -24.5%(after seven rate increases = 34.2%)(‘05 5.4%, ’06 9.9%, ‘07 8.5%, ‘08 2.8%, ‘09 3.8%, ‘ 11 1.7%, ‘12 2.1%)

  11. USPS Business • FY 2013 projections • Revenue – $64.9 billion (-$0.3 billion) • Operating loss of $2.0 billion, net loss of$7.6 billion (including $5.6 billion prefunding payment) • Operating expenses: $66.9 billion (-$600 million) • Volume – 153.1 billion pieces (-6.8 billion pieces, -4.3%) • First-Class Mail: 64.5 billion pieces (-4.2 billion pieces, -6.1%) • Standard Mail: 77.0 billion pieces (-2.5 billion pieces, -3.1%)

  12. USPS Business • FY 2013 projections • Revenue – $64.9 billion (-$0.3 billion) • Operating loss of $2.0 billion, net loss of$7.6 billion (including $5.6 billion prefunding payment) • Operating expenses: $66.9 billion (-$600 million) • Volume – 153.1 billion pieces (-6.8 billion pieces, -4.3%) • First-Class Mail: 64.5 billion pieces (-4.2 billion pieces, -6.1%) • Standard Mail: 77.0 billion pieces (-2.5 billion pieces, -3.1%) • FY 2013 YTD (through February) • Revenue – $28.4 billion (+0.9% plan, +0.5% SPLY) • Operating loss of $102 million, net loss of$2.5 billion (including set-aside for prefunding payment and OWCP) • Operating expenses: $28.5 billion (-0.3% plan, +0.6% SPLY) • Volume – 69.04 billion pieces (+2.2% plan, -0.5% SPLY) • First-Class Mail: 28.9 billion pieces (-4.3% SPLY) • Standard Mail: 35.1 billion pieces (+2.7% SPLY)

  13. USPS Business • Cost reductions • Reduce delivery days from six to five • Nonbinding PRC issued opinion March 24, 2011 • No change unless Congress lifts requirement for six-day delivery • USPS failed to evaluate impact on customers in rural areas • USPS announced plan February 6 to modify delivery in August • House passed CR with rider; Issa claims no conflict • Optimize retail infrastructure • 3,700 post offices initially under review for closure • Congressional pressure to preserve rural post offices • Revised “POSt” (Post Office Structure) plan announced • Keep rural offices open with reduced retail hours • Evaluate about 13,000 post offices • Establish administrative offices with subordinate POs • Endorsed by PRC advisory opinion • Expand alternative access (“Village Post Office,” APCs, etc.)

  14. USPS Business • Cost reductions • Change service standards • Eliminate overnight, expand 2-day service for First-Class Mail • Minimal impact on other classes • Final rule released May 21 • Phase 1 effective July 1, 2012; retains about 80% of current O/N • Phase 2 effective February 1, 2014; trims O/N to local plant only • Network realignment • Close/consolidate over 220 processing facilities • Change processing schedule, optimize equipment utilization • Implementation delayed by Congressional pressure • Revised, two-phase plan • Phase 1a: Summer 2012 – 48 plants • Phase 1b: Spring 2013 – 92144 plants • Phase 2: Spring 2014 – 89+/-37plants • Total complement reduction expected: 28,000

  15. USPS Business • The “exigent” case • Filed July 6, 2010 • PRC decision September 30, 2010 • US Court of Appeals decision May 24, 2011 • PRC decision issued September 20, 2011 • PRC asked for complete case in December 2011 • Awaiting USPS action – or Congressional direction

  16. USPS Business • The “exigent” case • Filed July 6, 2010 • PRC decision September 30, 2010 • US Court of Appeals decision May 24, 2011 • PRC decision issued September 20, 2011 • PRC asked for complete case in December 2011 • Awaiting USPS action – or Congressional direction • The next rate case • Notice expected in Fall 2013, implementation in January 2014 • Continued PRC pressure to correct “underwater” rates • Standard Mail flats and parcels • Periodicals • Bound Printed Matter • Preferred and nonprofit rates

  17. The next rate case CPI cap as of February CPI: 1.887% USPS Business

  18. USPS Business • Congressional influence or (in)action • Service • Resistance to reduction in delivery days • Concerns over changes in service standards • Facilities • Delay on consolidations of processing plants • Delay on closures of post offices, stations, branches • Finances • Unwillingness to reschedule payments for RHBF • Attention on rules for budget “scoring” • Continuation of mandated programs, preferred rates • Failure to act on OWCP rules • Consideration of higher cap on borrowing • Lack of consensus on business model changes

  19. USPS Business • Leading legislative proposals in 112th Congress • Senate: S 1789 (Carper-Collins-Brown-Lieberman) passed 4/17 • Adjust schedule of payments to prefund future health costs • Use some overpayments to incent early retirements • Defer five-day delivery, PO and facility closures • Require more review of closures of processing facilities • Establish retail access standards • Does not address labor issues, larger overpayment • House: HR 2309 (Issa) never brought to a vote • Establish two new oversight authorities • Allow five-day delivery • Allows faster infrastructure changes • Amends arbitration process, employees insurance contributions • Requires rates afford full cost coverage • Does not address overpayments • New bills need to be filed in 113th Congress

  20. Industry issues • Other hot topics • Folded self-mailers • IMB requirements • January 2013 • January 2014 • Coiled stamps • Residual FCM price • By/for • MDAs • Access • Consistency of rulings

  21. Take-aways • Stay informed • Price changes • Network changes • Revisions to mailing standards • PRC activities • Rate, classification changes • Complaint cases • Legislation in Congress • Technology developments • Pay attention!

  22. Leo Raymond AMSP1800 Diagonal Rd., Ste. 310 Alexandria, VA 22314-2862 703-836-9200 lraymond@amsp.org

  23. Questions

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