BIG RISK: USPS Package Growth Relies On Three Customers

In its 10-K filing that came with its financial results for the first quarter, the USPS details two major risks to its financal health: 1) a lack of a Board of Governors and 2) a concentration of volume in just three customers (speculated to be Amazon, UPS, and FedEx which use the USPS’ Parcel Select service).

From the 10-K Filing:

“Although the Postal Reorganization Act established our eleven-seat Board with nine seats for independent Governors, the number of Governors in office is now zero, and our continuing authority to take certain important actions is untested. On December 8, 2016, the hold-over term of our last remaining independent Governor expired, and as a result the Board has no presidentially appointed Governors for the first time since we began operations as the United States Postal Service in 1971.

“During the 114th Congress, the Senate failed to act on any of the President’s six nominations to the Board, and those nominations were returned to the President upon the adjournment of Congress on January 3, 2017.

“The Temporary Emergency Committee of the Board, which is exercising those powers of the Board necessary for continuity of operations, now consists only of our Postmaster General and Deputy Postmaster General. As described in our Annual Report, certain powers are vested in the Governors alone. These powers include setting our prices, approving new services and appointing (and, if necessary, removing) our Postmaster General and Deputy Postmaster General. Because no Governors are currently in office, it is uncertain how the important powers reserved to the Governors can be exercised.

“Although the Postal Service’s Competitive service revenues have increased, this increase is largely due to significant volume growth from three major customers, all of whom are building the capability which would enable them to divert volume away from the Postal Service.

“The growth in our Competitive service revenues over the past five years is largely attributable to three major customers. Each of those three major customers is building the capability which would enable them to divert volume away from the Postal Service over time. If those customers divert significant volume away from the Postal Service, the growth in our Competitive service revenues may not continue.”

Click to read 10-K. The passages above appear on page 29.