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1、 Draft May 9,2024(6.0)_ _ _ _ _ UNITED STATES POSTAL REGULATORY COMMISSION Washington,D.C.20268-0001 FORM 10-Q QUARTERLY REPORT PURSUANT TO 39 U.S.C.3654 AND SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31,2024 or TRANSITION REPORT PURSUANT TO SECTIO

2、N 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _ to _ UNITED STATES POSTAL SERVICE(Exact name of registrant as specified in its charter)Washington,D.C.41-0760000(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)475 LE

3、nfant Plaza,S.W.Washington,D.C.20260(Address of principal executive offices)(ZIP Code)(202)268-2000(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:Title of each class Trading Symbol(s)Name of each exchange on which registered Not applicable

4、 Not applicable Not applicable Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(

5、2)has been subject to such filing requirements for the past 90 days.Yes No Not Applicable Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the precedin

6、g 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Not Applicable Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company or an emerging growth company.See th

7、e definitions of large accelerated filer,accelerated filer,smaller reporting company and emerging growth company in Rule 12b-2 of the Exchange Act.Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company Not applicable If an emerging growth co

8、mpany,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined

9、in Rule 12b-2 of the Exchange Act).Yes No 508-5/14/24-mh TABLE OF CONTENTS Glossary of Acronyms and Defined Terms 3 PART I.FINANCIAL INFORMATION Item 1.Financial Statements 5 Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations 20 Item 3.Quantitative and Qualit

10、ative Disclosures About Market Risk 34 Item 4.Controls and Procedures 34 PART II.OTHER INFORMATION Item 1.Legal Proceedings 35 Item 1A.Risk Factors 35 Item 6.Exhibits 35 Quarter II,2024 Report on Form 10-Q United States Postal Service 2 GLOSSARY OF ACRONYMS AND DEFINED TERMS The following are defini

11、tions of some of the terms or acronyms that may be used throughout this report:Term or Acronym Definition Annual Report Annual Report on Form 10-K AFL-CIO American Federation of Labor and Congress of Industrial Organizations APWU American Postal Workers Union,AFL-CIO ASC Accounting Standards Codific

12、ation ASU Accounting Standards Update Board Board of Governors of the United States Postal Service CEO Chief Executive Officer CFO Chief Financial Officer CODM Chief Operating Decision Maker COFA Compacts of Free Association COLA(s)Cost-of-living adjustment(s)COVID-19 Coronavirus CPI-U Consumer Pric

13、e Index for All Urban Consumers CSRS Civil Service Retirement System DOL U.S.Department of Labor DPMG Deputy Postmaster General Exchange Act Securities and Exchange Act of 1934,enacted as Public Law 73-291 FAS Freely Associated States FASB Financial Accounting Standards Board FECA Federal Employees

14、Compensation Act FEHB Federal Employees Health Benefits FERS Federal Employees Retirement System FFB Federal Financing Bank GAAP Generally accepted accounting principles in the U.S.HHS U.S.Department of Health and Human Services House U.S.House of Representatives IRA Inflation Reduction Act of 2022,

15、enacted as Public Law 117-169 NALC National Association of Letter Carriers,AFL-CIO NPMHU National Postal Mail Handlers Union,AFL-CIO NRLCA National Rural Letter Carriers Association OIG U.S.Postal Service Office of Inspector General OPM U.S.Office of Personnel Management OWCP Office of Workers Compe

16、nsation Programs PAEA Postal Accountability and Enhancement Act,enacted as Public Law 109-435 PMG Postmaster General PRA Postal Reorganization Act,enacted as Public Law 91-375 PRC Postal Regulatory Commission President U.S.President Quarter II,2024 Report on Form 10-Q United States Postal Service 3

17、Term or Acronym Definition PSHB Postal Service Health Benefits PSRA Postal Service Reform Act of 2022,enacted as Public Law 117-108 PSRHBF Postal Service Retiree Health Benefits Fund RFA Revenue Forgone Reform Act,enacted as Public Law 103-123 SEC U.S.Securities and Exchange Commission Senate U.S.Se

18、nate TSP Thrift Savings Plan U.S.United States U.S.C.U.S.Code USPS U.S.Postal Service VP Vice President Quarter II,2024 Report on Form 10-Q United States Postal Service 4 PART I.FINANCIAL INFORMATION ITEM 1.FINANCIAL STATEMENTS UNITED STATES POSTAL SERVICE STATEMENTS OF OPERATIONS(UNAUDITED)Three Mo

19、nths Ended Six Months Ended March 31,March 31,(in millions)2024 2023 2024 2023 Revenue:Operating revenue$19,712$19,302$41,326$40,801 Other revenue 3 51 6 108 Total revenue 19,715 19,353 41,332 40,909 Operating expenses:Compensation and benefits 13,296 12,937 27,331 26,979 Retirement benefits 2,602 2

20、,471 5,183 4,927 Workers compensation 162 1,075 1,765 1,426 Transportation 2,145 2,430 4,669 5,442 Other operating expenses 3,080 3,057 6,142 5,890 Total operating expenses 21,285 21,970 45,090 44,664 Loss from operations(1,570)(2,617)(3,758)(3,755)Interest and investment income 235 227 484 433 Inte

21、rest expense(133)(90)(266)(186)Net loss$(1,468)$(2,480)$(3,540)$(3,508)See accompanying notes to the unaudited financial statements.Quarter II,2024 Report on Form 10-Q United States Postal Service 5 UNITED STATES POSTAL SERVICE BALANCE SHEETS(in millions)March 31,2024 September 30,2023(unaudited)Cur

22、rent Assets:Cash and cash equivalents$5,886$8,055 Restricted cash 2,067 1,544 Short-term investments 9,414 8,790 Receivables,net(less allowances of$163 and$141)1,398 1,427 Supplies,advances,and prepayments 328 281 Total current assets 19,093 20,097 Restricted cash,noncurrent 2,593 35 Restricted inve

23、stments,noncurrent 959 3,198 Property and equipment,net 17,552 16,254 Operating lease right-of-use assets 4,985 5,072 Other assets 646 633 Total assets$45,828$45,289 Current Liabilities:Compensation and benefits$2,360$1,942 Retirement benefits 25,492 22,736 Workers compensation 1,553 1,418 Payables

24、and accrued expenses 2,617 2,740 Deferred revenue-prepaid postage 2,391 2,367 Operating lease liabilities 1,145 1,193 Customer deposit accounts 1,170 1,200 Other current liabilities 1,701 1,950 Short-term debt 1,000 1,000 Total current liabilities 39,429 36,546 Workers compensation,noncurrent 12,751

25、 12,538 Operating lease liabilities,noncurrent 3,980 4,013 Employees accumulated leave,noncurrent 2,304 2,471 Other noncurrent liabilities 866 833 Long-term debt 13,150 12,000 Total liabilities 72,480 68,401 Net Deficiency:Capital contributions of the U.S.government Deficit since 1971 reorganization

26、 Total net deficiency 16,132(42,784)(26,652)16,132(39,244)(23,112)Total liabilities and net deficiency$45,828$45,289 See accompanying notes to the unaudited financial statements.Quarter II,2024 Report on Form 10-Q United States Postal Service 6 UNITED STATES POSTAL SERVICE STATEMENTS OF CHANGES IN N

27、ET DEFICIENCY(UNAUDITED)For the three and six months ended March 31,2023 Capital Accumulated Contributions of Deficit Since(in millions)U.S.Government Reorganization Total Net Deficiency Balance,September 30,2022$16,132$(32,766)$(16,634)Net loss (1,028)(1,028)Balance,December 31,2022$16,132$(33,794)

28、$(17,662)Net loss (2,480)(2,480)Balance,March 31,2023$16,132$(36,274)$(20,142)See accompanying notes to the unaudited financial statements.For the three and six months ended March 31,2024 Capital Accumulated Contributions of Deficit Since(in millions)U.S.Government Reorganization Total Net Deficienc

29、y Balance,September 30,2023$16,132$(39,244)$(23,112)Net loss (2,072)(2,072)Balance,December 31,2023$16,132$(41,316)$(25,184)Net loss (1,468)(1,468)Balance,March 31,2024$16,132$(42,784)$(26,652)See accompanying notes to the unaudited financial statements.Quarter II,2024 Report on Form 10-Q United Sta

30、tes Postal Service 7 UNITED STATES POSTAL SERVICE STATEMENTS OF CASH FLOWS(UNAUDITED)Six Months Ended March 31,(in millions)2024 2023 Cash flows from operating activities:Net loss$(3,540)$(3,508)Adjustments to reconcile net loss to net cash provided by(used in)operating activities:Depreciation and a

31、mortization 940 868 Other,net 76(130)Decrease in operating lease right-of-use assets 87 184 Increase in noncurrent workers compensation 213 30 Decrease in noncurrent operating lease liabilities(33)(106)Decrease in other noncurrent liabilities(139)(222)Changes in current assets and liabilities:Receiv

32、ables,net 29(22)Other current assets(47)(31)Retirement benefits 2,756 2,504 Payables,accrued expenses,and other 174(1,156)Operating lease liabilities(48)(74)Deferred revenue-prepaid postage and other deferred revenue(10)(39)Net cash provided by(used in)operating activities 458(1,702)Cash flows from

33、investing activities:Purchases of property and equipment(2,236)(1,266)Proceeds from sales of property and equipment 4 185 Purchases of short-term investments(9,300)(5,000)Purchases of restricted investments(464)Redemption of short-term investments 8,637 5,000 Redemption of restricted investments 2,6

34、77 Net cash used in investing activities(682)(1,081)Cash flows from financing activities:Proceeds from borrowings 1,150 416 Payments on finance lease obligations(14)(14)Net cash provided by financing activities 1,136 402 Net increase(decrease)in cash,cash equivalents&restricted cash 912(2,381)Cash,c

35、ash equivalents&restricted cash-beginning of period 9,634 23,618 Cash,cash equivalents&restricted cash-end of period$10,546$21,237 Supplemental cash flow disclosures:Cash paid for interest$274$175 See accompanying notes to the unaudited financial statements.Quarter II,2024 Report on Form 10-Q United

36、 States Postal Service 8 NOTES TO UNAUDITED FINANCIAL STATEMENTS NOTE 1-BASIS OF PRESENTATION The accompanying unaudited interim financial statements of the United States Postal Service(the“Postal Service,”“USPS,”“we,”“our,”and“us”)have been prepared in accordance with GAAP for interim financial inf

37、ormation and with the instructions to Form 10-Q and Rule 10-01 of the SEC Regulation S-X.These financial statements should be read in conjunction with our financial statements for the year ended September 30,2023,included in our Annual Report filed with the PRC on November 14,2023,and do not include

38、 all information and footnotes which are normally included in the Annual Report.Except as otherwise specified,all references to years are to fiscal years beginning October 1 and ending September 30,and quarters are quarters within fiscal years 2024 and 2023.In the opinion of management,the accompany

39、ing unaudited interim financial statements reflect all material adjustments,including recurring adjustments,necessary to fairly present the financial position of the Postal Service as of March 31,2024,the results of operations for the three and six months ended March 31,2024 and 2023,the changes in

40、net deficiency for the three and six months ended March 31,2024 and 2023,and the cash flows for the six months ended March 31,2024 and 2023.Operating results for the three and six months ended March 31,2024 are not necessarily indicative of the results that may be expected for all of 2024.Mail volum

41、e and revenue are historically greatest in the first quarter of the year,which includes the holiday mailing season.NOTE 2-RECENT ACCOUNTING PRONOUNCEMENTS In November 2023,the FASB issued ASU 2023-07 Improvements to Reportable Segment Disclosures,which has since been codified in ASC 280,Segment Repo

42、rting.While the ASU does not change how an entity identifies a reportable segment,it does require that all entities,including those that consist of a single reportable segment,shall disclose all of the required elements of the standard for each period an income statement is presented(i.e.,both annua

43、l and interim periods).The ASU amendments are intended to improve reportable segment disclosure requirements,primarily through enhanced disclosures about significant segment expenses.ASU 2023-07 will become effective for our 2025 fiscal year(beginning October 1,2024)and the quarters therein for our

44、2026 fiscal year(beginning October 1,2025),with early adoption permitted.We are currently evaluating the impact of adopting this standard on our financial statements and disclosures.In March 2024,the SEC adopted final rules requiring public entities to provide certain climate-related disclosures,inc

45、luding estimates of greenhouse gas emissions,in their registration statements and annual reports.As part of the disclosures,entities will be required to quantify effects of severe weather events and other natural conditions in notes to their audited financial statements.On April 4,2024,the SEC pause

46、d the implementation of the final rules pending judicial review.Assuming the implementation timelines for the rules remain the same,the rules will begin to phase-in for our fiscal year 2026.We are currently evaluating the impact of the new rules on our financial statements and disclosures.NOTE 3-LIQ

47、UIDITY The following table presents our cash,cash equivalents,and restricted cash included in our accompanying unaudited Statements of Cash Flows as of March 31,2024 and March 31,2023:(in millions)March 31,2024 March 31,2023 Cash and cash equivalents$5,886$16,400 Restricted cash,current 2,067 1,064

48、Restricted cash,noncurrent 2,593 3,773 Total cash,cash equivalents,and restricted cash$10,546$21,237 Quarter II,2024 Report on Form 10-Q United States Postal Service 9 Liquidity ManagementWe manage our liquidity through cash and cash equivalents,short-term investments,and borrowing capacity which is

49、 limited by statute to total debt of$15.0 billion and annual net increases of$3.0 billion calculated as of the end of each fiscal year.The following table presents the components of our unrestricted liquidity as of March 31,2024 and September 30,2023:(in millions)March 31,2024 September 30,2023 Cash

50、 and cash equivalents$5,886$8,055 Short-term investments 9,414 8,790 Borrowing capacity*850 2,000 Total liquidity$16,150$18,845*Borrowing capacity represents our statutory limit on total debt of$15.0 billion less the$14.2 billion and$13.0 billion of all debt outstanding as of March 31,2024 and Septe

51、mber 30,2023,respectively.We are also limited by statute to annual net increases in debt of$3.0 billion calculated as of the end of each fiscal year.Cash and Cash Equivalents We generate our cash almost entirely from the sale of postal products and services.We hold our Cash and cash equivalents with

52、 the Federal Reserve Bank of New York and invest our excess cash,when available and not immediately necessary for operations,in highly liquid,short-term investments issued by the U.S.Treasury.See Note 6-Investments for additional information on our investments.Debt and Borrowing Capacity We are auth

53、orized by the PRA to raise cash through the issuance of debt obligations.The PRA requires us to notify the Secretary of the Treasury of our intent to issue debt and to allow the U.S.Treasury the first option to purchase such obligations.We coordinate with the FFB,a government-owned corporation under

54、 the general supervision of the Secretary of the Treasury,on these notifications.Under the terms of our note purchase agreement,we issued the following debt obligations during 2024:($in millions)Issuance Date Maturity Date Balance Rate February 5,2024*February 9,2037$500 4.338%March 27,2024*March 29

55、,2038$650 4.462%*Included in Long-term debt in the accompanying unaudited Balance Sheets as of March 31,2024.On April 30,2024,we repaid the$1.0 billion short-term fixed-rate note and on the same date borrowed$1.0 billion on a long-term fixed-rate note at 4.756%that matures on April 26,2034.Liquidity

56、 Concerns We continue to face systemic imbalances that make our current operating model unsustainable.As communicated in the Delivering for America plan,we are implementing strategic operational reforms to meet the changing needs of our business and residential customers.While significant progress h

57、as been made,the success of the plan still requires successful implementation of numerous management initiatives.Furthermore,legislative change will be required to address retiree pension benefit funding rules determining how OPM apportions the costs for the CSRS benefits for employees and retirees

58、that worked for both the Postal Service and the Post Office Department,or alternatively the Postal Service will need to identify and pursue more drastic additional cost cutting and revenue initiatives to achieve equivalent results to those reflected in the plan related to CSRS benefit reform.Shortfa

59、lls or delays in implementation of the plan will place additional pressure on our liquidity and financial results.As a result of these concerns,we may not have sufficient liquidity to meet all of our existing legal obligations when due while also repaying our maturing debt and making the critical in

60、frastructure investments that have been deferred in recent years,and that are necessary to fulfill our primary mission.Quarter II,2024 Report on Form 10-Q United States Postal Service 10 Business Model Challenges and Constraints We are constrained by laws and regulations which restrict revenue sourc

61、es,mandate certain expenses,and have significantly affected our ability to cover all legally imposed costs.Many employee and retiree benefit costs are mandated by law and cannot be altered without additional legislative change,and some of these costs have historically increased at a higher rate than

62、 inflation.Such expenses include amortization payments to provide full funding of retiree pension benefits that must be funded through the sale of postal products and services and that are therefore unlike those imposed on most other federal entities who receive appropriations for such charges.As a

63、result,we have experienced many years of net losses,and our liabilities greatly exceed our assets.Mail volumes,representing First-Class Mail and Marketing Mail,have declined 47%between 2007 and 2023.Despite these declines,mail services still accounted for more than half of our operating revenue in 2

64、023.While we have received some additional pricing flexibility from the PRC in recent years,mail services are subject to an inflation-based price cap system that limits our ability to offset declining volumes or generate increased revenue.However,our costs are not similarly constrained or capped and

65、 we continue to be constrained by law,or by contract,from reducing many of our costs or from pursuing many alternate sources of revenue.A large portion of our cost structure cannot be altered expeditiously due to our universal service mission.Many employee costs,such as compensation and employee hea

66、lth benefit premiums,are subject to contractual arrangements.Other employee costs such as workers compensation costs and retiree pension benefit amortization costs are mandated by law.The allocation of retiree pension benefit amortization costs related to CSRS employees who worked for both the Post

67、Office Department and the Postal Service cannot be altered without legislative change.See Note 9-Retirement Plans,Note 10-Health Benefits Plans,and Note 11-Workers Compensation for further information on statutorily mandated costs.Further,the number of delivery points continues to grow with an incre

68、ase of 1.7 million in 2023,which drives up delivery costs.When combined with lower mail volume,this has resulted in a drop in the average number of pieces delivered per delivery point per day from 5.5 pieces in 2007 to 2.6 pieces in 2023,a decline of 53%.Past Due Obligations In order to preserve liq

69、uidity and ensure that our ability to fulfill our primary mission is not placed at undue risk,we have not made certain annual amortization payments to OPM for CSRS and FERS.In 2023 and 2022,we were unable to make the CSRS payments of$3.0 billion and$2.3 billion and the full payments of$2.1 billion a

70、nd$1.6 billion towards our FERS obligations,respectively.However,we did remit partial payments of$600 million and$500 million towards our FERS obligation for 2023 and 2022,respectively.The following table presents the total retirement pension benefit expense accrued but unpaid by us as of September

71、30,2023 and the fiscal years in which the accruals were recorded:2012 to(in millions)2023 2022 2021 2020 Total CSRS unfunded retirement benefits amortization$3,015$2,284$1,858$6,615$13,772 FERS unfunded retirement benefits amortization 1,541 1,126 1,401 4,773 8,841 Total expense accrued but unpaid$4

72、,556$3,410$3,259$11,388$22,613 As of the date of this report,we have not incurred any penalties or negative financial consequences as a result of not making these payments.Mitigating Circumstances We continue to pursue strategies within our control to increase operational efficiency and improve liqu

73、idity.We have managed capital in recent years by spending what we believed was essential to maintain our existing facilities and service levels,to ensure employee health and safety,and to increase efficiencies.However,continued increases in capital investment are necessary to upgrade our facilities,

74、fleet of vehicles,and processing equipment in order to remain operationally viable.Aggressive management of the business Quarter II,2024 Report on Form 10-Q United States Postal Service 11 operations that will enable us to increase revenue and reduce costs and legislative reform related to how OPM a

75、pportions the cost of the CSRS benefits for our employees and retirees who also worked for the Post Office Department will all be necessary to restore us to financial health.In the event legislative change concerning CSRS benefits is not implemented,the Postal Service will need to identify and pursu

76、e more drastic additional cost cutting and revenue initiatives to achieve equivalent results to those reflected in the plan related to CSRS benefit reform.With annual total revenue of over$78 billion in 2023,a financially sound Postal Service continues to be vital to the U.S.economy and commerce.The

77、 U.S.economy benefits greatly from the Postal Service and many businesses that provide the printing and mailing services that we support.Disruption of the mail would cause undue hardship to businesses and consumers as it would significantly inhibit the remittance of payments through the mail,as well

78、 as the delivery of vital mail and packages like medicine,essential consumer staples,benefit checks,and important information.In the event of a cash shortfall,the U.S.government would likely prevent us from significantly curtailing or ceasing operations.In the event that circumstances leave us with

79、insufficient liquidity,we would likely be required to implement additional contingency plans to ensure that our primary mission is fulfilled and that mail deliveries continue.These measures may require us to prioritize payments to the FFB,employees,and suppliers ahead of some payments to fund retire

80、ment pension benefits,as has been done in the past.NOTE 4-REVENUE RECOGNITION The PAEA classifies the services we offer as either Market-Dominant or Competitive products;however,the term services is used in this report for consistency with other descriptions of services we offer.We generate the majo

81、rity of our revenue from contracts associated with the processing and delivery of different types of mail and packages,both domestically and internationally,which generally occur over several days.Disaggregation of Revenue The following table summarizes our disaggregated operating revenue for the th

82、ree and six months ended March 31,2024 and 2023 by service category:Three Months Ended Six Months Ended March 31,March 31,(in millions)2024 20231 2024 20231 Operating Revenue:First-Class Mail2 Marketing Mail3 Shipping and Packages4$6,590 3,653 7,711$6,310 3,579 7,622$13,318 7,781 16,790$12,867 7,942

83、 16,462 International 366 400 802 861 Periodicals 221 226 460 465 Other5 1,171 1,165 2,175 2,204 Total operating revenue$19,712$19,302$41,326$40,801 1 Prior period amounts for certain service categories include reclassifications of amounts amongst service categories to conform to current period pres

84、entation.These reclassifications are immaterial for each affected category and have no effect on total operating revenue for the period.These reclassifications are required by our regulatory requirements and are included in this document for consistency amongst publicly available information.2 Exclu

85、des First-Class Package Service-Retail and First-Class Package Service-Commercial.3 Excludes Marketing Mail Parcels.4 Includes Priority Mail,USPS Ground Advantage,USPS Retail Ground,Parcel Select Mail,Parcel Return Service Mail,Marketing Mail Parcels,Package Service Mail,First-Class Package Service-

86、Retail,First-Class Package Service-Commercial and Priority Mail Express.USPS Retail Ground,Parcel Select Ground(a component of Parcel Select Mail),First-Class Package Service-Retail,and First-Class Package Service-Commercial were retired in July 2023 and replaced by USPS Ground Advantage.5 Includes

87、PO Box and Caller services,Certified Mail,Return Receipts,Insurance,Other Ancillary Services,Shipping and Mailing Supplies,Collect on Delivery,Registered Mail,Stamped Envelopes and Cards,Money Orders and other services.Also includes revenue other than postage associated with COVID-19 test distributi

88、on.Quarter II,2024 Report on Form 10-Q United States Postal Service 12 Contract Liabilities The following table presents the balances of our contract liabilities,including Deferred revenue-prepaid postage,prepaid PO Box and Caller Service fees,as of March 31,2024 and September 30,2023:(in millions)M

89、arch 31,2024 September 30,2023 Deferred revenue-prepaid postage:Forever stamps$1,453$1,427 Mail-in-transit 492 555 Metered postage 272 296 Other 174 89 Total deferred revenue-prepaid postage 2,391 2,367 Prepaid PO Box and Caller Service fees*618 623 Total deferred revenue$3,009$2,990 1 Included with

90、in Other current liabilities in the accompanying unaudited Balance Sheets.The following table provides details of revenue recognized during the six months ended March 31,2024 that was reported in our contract liabilities for deferred revenue as of September 30,2023:Six Months Ended(in millions)March

91、 31,2024 Revenue recognized in the period from deferred revenue:Forever stamps Mail-in-transit$770 555 Metered postage Other 296 50 Prepaid PO Box and Caller Service fees 506 NOTE 5-RELATED PARTIES As disclosed throughout this report,we have significant transactions with other U.S.government entitie

92、s,which are considered related parties for accounting purposes.In September 2022,we received a capital contribution from the U.S.government of$3.0 billion under the IRA.Of this amount,$1.29 billion is available for the procurement of zero-emission vehicles.Additionally,$1.71 billion is available for

93、 the purchase,design,and installation of the requisite infrastructure to support zero-emission delivery vehicles at facilities that we own or lease from non-federal entities.These amounts remain available for use through September 30,2031 and may earn interest restricted for the same purpose.As of M

94、arch 31,2024,we held$683 million in Restricted cash,$1.5 billion in Restricted cash,noncurrent,and$855 million in Restricted investments,noncurrent associated with this funding.In January 2022,we signed an inter-agency agreement with HHS to distribute COVID-19 test kits to American households upon t

95、heir requests.The current agreement provides that we will receive payment for postage and be fully reimbursed for our direct costs.We have received advanced payments pursuant to this agreement.Any unused funding will be returned to HHS following the completion of the contract.If the postage and reim

96、bursable costs should exceed the amount already received,HHS will provide additional funding.The agreement has been extended to allow for additional services,if needed,on behalf of HHS.In March 2024,the Consolidated Appropriations Act,2024,was enacted as Public Law 118-42.The act included the COFA w

97、hich extended international agreements between the U.S.government and three countries to govern the mail service relationships between us and the Republic of the Marshall Islands,Federated States of Micronesia,and Republic of Palau,collectively known as the FAS.We have been appropriated$31.7 million

98、 for each of the fiscal years 2024 through 2043,out of any funds in the U.S.Treasury not otherwise appropriated,to be used in covering the costs of transporting this mail.Quarter II,2024 Report on Form 10-Q United States Postal Service 13 The following table presents related-party assets and liabili

99、ties as of March 31,2024 and September 30,2023:(in millions)March 31,2024 September 30,2023 Related-party assets:Carrying amount of revenue forgone installment receivable1$547$539 Related-party liabilities:Short-term debt$1,000$1,000 Other current liabilities2 27,434 24,578 Long-term debt 13,150 12,

100、000 Other noncurrent liabilities3 12,776 12,550 1 Included within Other assets in the accompanying unaudited Balance Sheets.See further discussion of the fair value measurement of this receivable in Note 13-Fair Value Measurement.2 Includes the CSRS and FERS obligations due to OPM and current worker

101、s compensation obligations due to DOL,as well as payables to other agencies and the remaining funding associated with the COVID-19 test kit distribution.See further discussion in Note 9-Retirement Plans and Note 11-Workers Compensation.3 Includes noncurrent workers compensation obligations due to DO

102、L.See further discussion in Note 11-Workers Compensation.The revenue forgone installment receivable represents the receivable associated with the RFA.The RFA authorized$1.2 billion to be paid to us in 42 annual installment payments of$29 million each year from 1994 through 2035 as reimbursement for

103、below-cost postage offered to certain categories of mailers between 1991 and 1998.Although the RFA authorized the reimbursement,Congress must appropriate the$29 million to us within the annual federal budget for us to receive funding.As of September 30,2023,the past due installments unpaid by Congre

104、ss was$308 million.We continue to include the total past due installments in each annual appropriations request to Congress.Although we have not consistently received the installment payments,the amounts are established by the RFA and,in any year,Congress could appropriate the full amount,including

105、past-due installments.We believe that the amount remains fully collectible and therefore no reserve is necessary for the uncollected amounts due to the full faith and credit of the U.S.government.For additional information on the revenue forgone installment receivable,see Part II,Item 8.Financial St

106、atements and Supplementary Data,Notes to Financial Statements,Note 16-Revenue Forgone in the 2023 Annual Report.We also hold our Cash and cash equivalents and restricted cash with the Federal Reserve Bank of New York.See Note 3-Liquidity and Note 6-Investments for additional information.The followin

107、g table presents related-party revenue and expenses for the three and six months ended March 31,2024 and 2023:Three Months Ended Six Months Ended March 31,March 31,(in millions)2024 2023 2024 2023 1Related-party operating revenue$427$368$923$789 2Related-party operating expenses4,256 4,013 8,486 8,0

108、23 Related-party interest income3 235 227 484 433 4Related-party interest expense138 91 276 170 1 Included within Operating revenue in the accompanying unaudited Statements of Operations.Amounts reported for the three and six months ended March 31,2024 and 2023 include revenue from HHS associated wi

109、th the COVID-19 test distribution.2 Included within Operating expenses in the accompanying unaudited Statements of Operations.Amounts reported include CSRS and FERS related retirement benefits expense and workers compensation expense.3 Represents interest imputed on the revenue forgone installment r

110、eceivable,as well as interest generated on U.S.Treasury instruments and other cash equivalents held with the Federal Reserve Bank of New York.Included within Interest and investment income in the accompanying unaudited Statements of Operations.4 Incurred on debt issued to the FFB and included within

111、 Interest expense in the accompanying unaudited Statements of Operations.Quarter II,2024 Report on Form 10-Q United States Postal Service 14 NOTE 6-INVESTMENTS We invest our restricted cash and excess cash,when available and not immediately necessary for operations,in investments issued by the U.S.T

112、reasury.As we have both the intent and ability to hold these securities to maturity,we have classified all of our investments as held-to-maturity.Our highly liquid investments with initial maturities of three months or less are included in Cash and cash equivalents or Restricted cash in the accompan

113、ying unaudited Balance Sheets.These amounts are not presented in the table below as their carrying values approximate fair value due to their short-term nature.As of March 31,2024,we had invested excess cash not immediately necessary for operations of$9.4 billion and restricted cash of$1.0 billion i

114、n Treasury bills of various maturities ranging between five-months and one-year,none of which had matured as of the date of this report.These held-to-maturity investments,which are recorded at amortized cost basis,are presented in the table below.Any unrealized losses are temporary due to changes in

115、 market interest rates.The cost basis of these securities will be recovered on redemption.(in millions)Fair value Amortized cost Unrealized Unrealized Fair value level basis gains losses U.S.government securities Level 1$10,373$(1)$10,372 These investments are included in Short-term investments and

116、Restricted investments,noncurrent in the accompanying unaudited Balance Sheets.Restricted investments,noncurrent include investments purchased with excess restricted cash,when available and not immediately necessary for operations,and have limited use due to the nature of the restrictions on the und

117、erlying funding,as described in Note 3-Liquidity.NOTE 7-PROPERTY AND EQUIPMENT,NET Assets within Property and equipment,net in the accompanying unaudited Balance Sheets are recorded at cost,which is calculated by including the interest on borrowings used to finance construction of major capital addi

118、tions less allowances for depreciation and amortization.Fixed assets are depreciated over estimated useful lives ranging from 3 to 40 years using the straight-line method.For the three months ended March 31,2024 and 2023,depreciation and amortization expense was$477 million and$443 million,respectiv

119、ely.For the six months ended March 31,2024 and 2023,depreciation and amortization expense was$940 million and$868 million,respectively.These items are included within Other operating expenses in the accompanying unaudited Statements of Operations.NOTE 8-COMMITMENTS AND CONTINGENCIES Collective Barga

120、ining Agreements As of March 31,2024,we had active contracts with each of our major collective bargaining units.The agreement expiration dates for those collective bargaining units are as follows:Collective Bargaining Unit Agreement Expiration Date NALC May 20,2023*NRLCA May 20,2024 APWU September 2

121、0,2024 NPMHU September 20,2025*Agreement with the NALC expired on May 20,2023,and the parties are engaged in continuing negotiations.Quarter II,2024 Report on Form 10-Q United States Postal Service 15 Contingent Liabilities Our contingent liabilities consist primarily of claims resulting from labor

122、and employment matters;asset retirement obligations and environmental matters;property damage and injuries on our properties;and issues arising from our contracts,personal claims and traffic accidents.Each quarter,we evaluate each claim to determine our potential liability.If we determine that an un

123、favorable outcome from a new claim is both probable and reasonably estimable,we record a liability for the amount.Preexisting claims are also reviewed and adjusted quarterly for resolutions or revisions to prior estimates based on new facts and circumstances.From time to time,we are involved in othe

124、r litigation incidental to the conduct of our business,none of which is expected to be material to our financial condition or operations.For additional information see Part I,Item 3.Legal Proceedings and Part II,Item 8.Financial Statements and Supplementary Data,Notes to Financial Statements,Note 11

125、-Commitments and Contingencies in the 2023 Annual Report.Provision for Losses We have made adequate provision for probable losses arising from all claims.The following table presents contingent liabilities by current and noncurrent portions as of March 31,2024 and September 30,2023:(in millions)Marc

126、h 31,2024 September 30,2023 Current/noncurrent portions of contingent liabilities:Current portion1$235$227 Noncurrent portion2 179 151 Total contingent liabilities$414$378 1 Included within Payables and accrued expenses in the accompanying unaudited Balance Sheets.2 Included within Other noncurrent

127、liabilities in the accompanying unaudited Balance Sheets.Reasonably Possible Contingencies We do not accrue for contingencies which we deem reasonably possible of an unfavorable outcome.These ranged in amount from$225 million to$1.2 billion at March 31,2024 and$300 million to$1.2 billion at Septembe

128、r 30,2023.NOTE 9-RETIREMENT PLANS The majority of career employees participate in one of two U.S.government defined benefit pension programs,CSRS and FERS,which are administered by OPM.Associated costs include the FERS normal costs,which are contributions based on a percentage of active employees ba

129、sic pay,and the CSRS and FERS amortization costs to fund the remaining unfunded liabilities.These costs are recorded in Retirement benefits in the accompanying unaudited Statement of Operations.Employees who participate in FERS are eligible to receive matching retirement contributions to the TSP,a d

130、efined contribution plan.Employees who participate in FERS and certain employees who participate in CSRS are also eligible to receive Social Security benefits upon retirement.We contribute at standard Social Security tax rates for these employees.These TSP and Social Security costs are recorded in C

131、ompensation and benefits in the accompanying unaudited Statement of Operations.Based on preliminary information provided by OPM,we estimate our annual payments due September 30,2024 will be$3.2 billion and$2.3 billion for the CSRS amortization and FERS amortization,respectively.We expect to receive

132、the invoice from OPM for the actual amounts due September 30,2024 during the fourth quarter of 2024,and this invoice may differ from the estimated projections and calculations due to further changes in experience and/or actuarial assumptions as of the calculation date.Quarter II,2024 Report on Form

133、10-Q United States Postal Service 16 The following table presents the retirement benefits expense for the three and six months ended March 31,2024 and 2023:Three Months Ended Six Months Ended March 31,March 31,(in millions)2024 2023 2024 2023 FERS normal costs CSRS unfunded retirement benefits amort

134、ization1 FERS unfunded retirement benefits amortization2$1,227 800 575$1,221 775 475$2,433 1,600 1,150$2,427 1,550 950 Total retirement benefits$2,602$2,471$5,183$4,927 1 Expense for the accrual for the annual payment due to OPM by September 30 of the respective fiscal year,to amortize the unfunded

135、CSRS retirement obligation.Payments are to be made through 2043 based on the OPM invoices.2 Expense for the accrual for the annual payment due to OPM by September 30 of the respective fiscal year,to amortize the unfunded FERS retirement obligation.Payments are to be made over a 30-year rolling perio

136、d based on the OPM invoices.For additional information,see Part II,Item 8.Financial Statements and Supplementary Data,Notes to Financial Statements,Note 12-Retirement Plans in the 2023 Annual Report.NOTE 10-HEALTH BENEFITS PLANS The FEHB Program covers nearly all career employees and also covers pre

137、-career employees and retirees who meet certain eligibility requirements.OPM administers the FEHB Program and allocates the cost of funding the program to participating U.S.government employers.Separate from the FEHB Program,we offer our own healthcare plan to certain pre-career employees who are in

138、eligible for the FEHB Program.The PSRA,which was enacted in April 2022,established the PSHB Program within the FEHB Program.Beginning in January 2025,our employees and annuitants eligible under the FEHB Program will be covered under the PSHB Program.Coverage and cost-sharing under the PSHB Program w

139、ill be equivalent to that under the FEHB Program to the greatest extent practicable.Active Employees Our employee health benefits expense,which includes the employer portion of Medicare taxes,is most significantly impacted by the number of employees electing coverage and the premium costs of the sel

140、ected plans.Our employee health benefits expense was$1.4 billion for both the three months ended March 31,2024 and 2023,respectively.Our employee health benefits expense was$2.8 billion and$2.6 billion for the six months ended March 31,2024 and 2023,respectively.This expense is included within Compe

141、nsation and benefits in the accompanying unaudited Statements of Operations.Retirees Despite us being a significant contributor of Medicare taxes,not all of our annuitants enroll in Medicare upon retirement.Beginning in January 2025,the PSRA requires the enrollment of annuitants covered by the PSHB

142、Program in Medicare,with certain limited exceptions.The PSRHBF will continue to pay annuitant premiums for our annuitants until the fund is exhausted.Once exhausted,we will be required to contribute to the PSRHBF based on a pay-as-you-go method,similar to most other federal agencies.Beginning in 202

143、6,we will also be required to make annual top-up payments to the PSRHBF,based on the difference between annuitant premiums and net claims costs,but only in the event premium payments exceed the claims costs.We will not incur retiree health benefit costs until either OPMs annual calculation results i

144、n a top-up payment,expected to occur in 2026,or the PSRHBF is exhausted and we are required to make contributions to OPM for annuitant premiums.Quarter II,2024 Report on Form 10-Q United States Postal Service 17 NOTE 11-WORKERS COMPENSATION Our employees who are injured on the job are covered by the

145、 FECA,administered by the DOLs OWCP,which makes most decisions regarding injured workers eligibility for benefits.We reimburse the DOL for all workers compensation benefits paid to or on behalf of our employees.We also pay the DOL an administrative fee for its services.Workers Compensation Liability

146、 We record a liability for workers compensation obligations for employees who have been injured on the job and are eligible for benefits or for their qualified survivors.We use an estimation model that utilizes generally accepted actuarial valuation techniques based on past claim-payment experience

147、and exposure to claims as measured by total employee hours worked.Changes in the liability are primarily attributable to the combined impacts of routine changes in actuarial assumptions,new compensation and medical cases,the progression of existing cases and changes in interest(discount)and inflatio

148、n rates,including long-term COLA rates for compensation claims,and medical rates for medical claims.These rates are updated as of the balance sheet date and factored into the model.To determine the liability each quarter,we first estimate the future total cost of workers compensation claims based on

149、 the dates of claim-related injuries,frequency or severity of the injuries,the pattern of historical payments to beneficiaries,and the expected trend in future costs.We then calculate the amount that would need to be invested at current interest(discount)rates to fully fund the future total cost of

150、claims,and this calculated present value is the recorded value of the workers compensation liability.In setting the discount rates,we use the current yield,as of the measurement date,on U.S.Treasury securities that are matched to the expected duration of both the medical and compensation payments.Ex

151、pected inflation in compensation claim obligations is estimated using the consensus inflation forecast from the Federal Reserve Bank of Philadelphia Survey of Professional Forecasters.Expected inflation for future medical claim obligations is estimated using the average rate of medical cost increase

152、s experienced by our workers compensation claimants over the past five years.This liability calculation is highly sensitive to changes in interest(discount)rates.For example,a 1%increase in the discount rate would decrease the March 31,2024 liability and related expense by$1.3 billion.Likewise,a 1%d

153、ecrease in the discount rate would increase the March 31,2024 liability and related expense by$1.6 billion.The following table details the applicable interest(discount)and inflation rates for compensation and medical claims,which are used to estimate the workers compensation liability as of March 31

154、,2024 and September 30,2023:March 31,2024 September 30,2023 Compensation claims liability:Interest(discount)rate 4.33%4.75%Long-term wage inflation rate 2.80%2.80%Medical claims liability:Interest(discount)rate 4.34%4.75%Medical inflation rate 3.10%3.10%As of March 31,2024 and September 30,2023,our

155、total liability for workers compensation was$14.3 billion and$14.0 billion,respectively.As of March 31,2024 and September 30,2023,the current portion of the liability was$1.6 billion and$1.4 billion,respectively,and the noncurrent portion of the liability was$12.7 billion and$12.6 billion,respective

156、ly,as reflected in the accompanying unaudited Balance Sheets.Quarter II,2024 Report on Form 10-Q United States Postal Service 18 Workers Compensation Expense The impacts of changes in discount rates and inflation rates,actuarial valuation of new cases,and revaluation of existing cases are components

157、 of total workers compensation expense recorded in the accompanying unaudited Statements of Operations.In addition,we pay an administrative fee to the DOL,which is considered a component of workers compensation expense.The following table presents the components of workers compensation expense for t

158、he three and six months ended March 31,2024 and 2023:Three Months Ended Six Months Ended March 31,March 31,(in millions)2024 2023 2024 2023 Impact of discount rate changes$(414)$529$567$407 Actuarial revaluation of existing cases 240 241 554 443 Cost of new cases 312 282 596 530 Administrative fee 2

159、4 23 48 46 Total workers compensation expense$162$1,075$1,765$1,426 For additional information,see Part II,Item 8.Financial Statements and Supplementary Data,Notes to Financial Statements,Note 14-Workers Compensation in the 2023 Annual Report.NOTE 12-LEASES We hold lessee positions in real property

160、leases as well as in leases embedded in service contracts involving rights to use transportation equipment and facilities.Lease costs for operating leases for all non-cancellable leases are set forth below for the three and six months ended March 31,2024 and 2023:Three Months Ended Six Months Ended

161、March 31,March 31,(in millions)2024 2023 2024 2023 Operating lease cost$343$340$682$679 Variable lease cost 134 151 284 292 Short-term lease cost 42 54 81 112 Total lease cost$519$545$1,047$1,083 The following information represents supplemental cash and non-cash information as well as lease term an

162、d discount rate information separately for operating leases for the six months ended March 31,2024 and 2023:Six Months Ended March 31,($in millions)2024 2023 Operating cash flows from operating leases$672$670 Right-of-use assets obtained in exchange for operating lease liabilities$121$112 Weighted-a

163、verage remaining lease term-operating leases 5.83 years 5.51 years Weighted-average discount rate-operating leases 2.60%1.84%For additional information,see Part II,Item 8.Financial Statements and Supplementary Data,Notes to Financial Statements,Note 15-Leases in the 2023 Annual Report.Quarter II,202

164、4 Report on Form 10-Q United States Postal Service 19 NOTE 13-FAIR VALUE MEASUREMENT The carrying amounts of certain current assets and liabilities,including cash and cash equivalents,restricted cash,accounts receivable,accounts payable and accrued expenses,approximate fair value due to their short-

165、term nature.Assets within Property and equipment,net are recorded at cost and measured at fair value on a nonrecurring basis if they are determined to be impaired or classified as assets held for sale.Noncurrent receivables and long-term debt are disclosed at fair value using inputs of the fair valu

166、e hierarchy model.This model prioritizes observable and unobservable inputs,which are used to measure fair value,and consists of three broad levels,as defined in authoritative literature.The carrying amount and fair value of the revenue forgone installment receivable and long-term debt are presented

167、 for disclosure purposes only in the following table:March 31,2024 September 30,2023(in millions)Fair value level CarryingAmount Fair Value CarryingAmount Fair Value Revenue forgone installment receivable1 Level 2$547$457$539$431 Long-term debt2 Level 3$13,150$12,738$12,000$11,324 1 The carrying amo

168、unt is included within Other assets in the accompanying unaudited Balance Sheets.See Note 5-Related Parties for additional information.2 The fair value amount reflects the premium or discount associated with prepayment of all debt based on prevailing interest rates plus any prepayment penalties,as a

169、pplicable.ITEM 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAUTIONARY STATEMENTS The following Managements Discussion and Analysis of Financial Condition and Results of Operations and other parts of this report describe the principal factors affecting the f

170、inancial results,liquidity,capital resources,and critical accounting estimates of the United States Postal Service(“Postal Service,”“USPS,”“we,”“our,”and“us”).Our results of operations may be impacted by risks and uncertainties discussed here and in our Annual Report for the year ended September 30,

171、2023,filed with the PRC on November 14,2023.Such factors,many of which we cannot control or influence,may cause actual results to differ materially from those currently contemplated.Our operating results for the three and six months ended March 31,2024 are presented in accordance with accounting pri

172、nciples generally accepted in the U.S.These results are not necessarily indicative of the results to be expected for the year ending September 30,2024 and should be read in conjunction with our 2023 Annual Report.All references to years in this report,unless otherwise stated,refer to fiscal years be

173、ginning October 1 and ending September 30.All references to quarters,unless otherwise stated,refer to quarters within fiscal years 2024 and 2023.Forward-looking statements contained in this report represent our best estimates of known and anticipated trends believed relevant to future operations.How

174、ever,actual results may differ significantly from current estimates.Certain forward-looking statements included in this report use such words as“may,”“will,”“could,”“expect,”“believe,”“plan,”“estimate,”“project,”or other similar terminology.These forward-looking statements,which involve a number of

175、risks and uncertainties,reflect current expectations regarding future events and operating performance as of the date of this report.See Part I,Item 1A.Risk Factors in our 2023 Annual Report for additional discussion on the risks and uncertainties that the Postal Service may face.We have no obligati

176、on to publicly update or revise any forward-looking statements,whether as a result of new information,future events,or otherwise.Quarter II,2024 Report on Form 10-Q United States Postal Service 20 OVERVIEW As an independent establishment of the Executive Branch of the U.S.government,we have a unique

177、 mission to:Serve the American people and,through the universal service mission,bind our nation together by maintaining and operating our unique,vital,and resilient infrastructure;Provide trusted,safe,and secure communications and services between the U.S.government and the American people,businesse

178、s and their customers,and the American people with each other;and Serve all areas of our nation,making full use of evolving technologies.We will carry out this mission by remaining an integral part of the U.S.government and providing all Americans with universal and open access to our unrivaled deli

179、very and retail network;using technology,innovation and,where appropriate,private-sector partnerships to meet our customers changing needs;operating in a modern,precise,efficient,and effective manner;and remaining an employer of choice,including attracting and retaining high-quality employees.We ser

180、ve consumer and commercial customers in the U.S.,as well as internationally.Our operations include an extensive and integrated retail,processing,distribution,transportation,and delivery network,and we operate throughout the U.S.,including its possessions and territories.We do not operate in segments

181、;we report our performance as a single business.The PAEA,classifies our products into two broad categories:Market-Dominant and Competitive“products.”However,we use the term“services”in this document for consistency with other descriptions of services offered.Legal and regulatory restrictions on Mark

182、et-Dominant pricing,service diversification,and operations currently restrict our ability to cover the costs we incur to provide prompt,reliable,and efficient postal services to the nation.Additionally,the statutes under which we operate establish certain mandated costs that affect our financial res

183、ults,including obligations for retirement pension benefits within CSRS and FERS.We must coordinate with OPM to address these obligations.While legal restrictions on pricing,service diversification,and operations currently restrict our ability to cover our costs to provide prompt,reliable,and efficie

184、nt postal services to the nation,we continue to implement initiatives that are expected to drive revenue by capitalizing on innovation,technology,customer and consumer insights,and data management.This includes strengthening the value of mail through the continued enhancement of Informed Delivery,wh

185、ich enables customers to digitally preview mail and manage package delivery and adds digital marketing capabilities to the printed mail piece,and by adhering to the commitment to meet evolving business needs via USPS Connect,which aims to drive package growth by broadening network access to same-day

186、 and next-day delivery capability for businesses of all sizes.In July 2023,we launched an improved affordable ground product,USPS Ground Advantage,that features two-to-five-day service standards for packages up to 70 pounds,replacing our retired First-Class Package Services subcategory and several o

187、ther service offerings.DELIVERING FOR AMERICA In March 2021,we published our vision and ten-year plan to achieve financial stability and service excellence entitled Delivering for America(https:/ comprehensive plan delivers:A modernized Postal Service capable of providing world class service reliabi

188、lity at affordable prices;Maintenance of universal six-day mail delivery and expanded seven-day package delivery;Workforce stability and investment strategies that empower,equip,and engage each employee and put them in the best possible position to succeed;Innovation that grows revenue and meets cha

189、nging marketplace needs;and Financial sustainability to fund our universal service mission.We can accomplish these goals with effective use of our pricing authorities,by operating more precisely and efficiently across our enterprise,and by driving revenue growth through innovative customer solutions

190、.In addition,legislative change will be required to address retiree pension benefit funding rules determining how Quarter II,2024 Report on Form 10-Q United States Postal Service 21 OPM apportions the costs for the CSRS benefits for employees and retirees that worked for both the Postal Service and

191、the Post Office Department,or alternatively the Postal Service will need to identify and pursue more drastic additional cost cutting and revenue initiatives to achieve equivalent results to those reflected in the plan related to CSRS benefit reform.Our strategies for revenue growth,cost savings,and

192、investment,combined with additional legislative actions,will enable us to operate in a financially self-sustaining manner while fulfilling our universal service mission.In the event legislative change concerning CSRS benefits is not implemented,the Postal Service will need to identify and pursue mor

193、e drastic additional cost cutting and revenue initiatives beyond those currently in the plan to achieve equivalent results in order to meet our financial targets.We continue to implement core elements of our plan and were provided with certain legislative reform that was needed through the enactment

194、 of the PSRA in April 2022.Our progress reports detailing our accomplishments and the status of plan execution can be found on our website(https:/ OF OPERATIONS SUMMARY The U.S.and global economies continue to experience significant volatility due to inflation and geopolitical conditions.While infla

195、tion has moderated in recent months,inflationary impacts and business and consumer confidence still remain unpredictable and continue to impact our results of operations for the three and six months ended March 31,2024.Regulatory constraints cause delays in our ability to generate revenue to keep pa

196、ce with inflation.Our Market-Dominant services are subject to a price cap system that is generally limited by the CPI-U,with some additional pricing flexibility and authority granted by the PRC.While we continue to judiciously implement our pricing authority,our price cap system restricts our abilit

197、y to timely adjust prices in line with inflation.In addition,the PRC is re-evaluating the system for regulating the prices for our Market-Dominant products through a rulemaking that was recently announced,and which could impact our pricing authority for such products either positively or negatively.

198、Other major factors that impacted our operating results include overall customer demand,the mix of postal services and the pricing and contribution associated with those services,the volume of mail and packages processed through our network,our ability to manage our cost structure in line with secul

199、arly declining levels of mail volume,increased competition in the more labor-intensive Shipping and Packages business,and an increasing number of delivery points.Three Months Ended March 31,2024 Our operating revenue for the three months ended March 31,2024 increased$410 million,or 2.1%,compared to

200、the same period last year.As more fully described below in Operating Revenue and Volume,this increase was largely due to price increases in our First-Class Mail and Marketing Mail categories and a volume increase in our Shipping and Packages category.However,these price increases were partially offs

201、et by declining volumes in our mail service categories during the quarter.Our operating expenses for the three months ended March 31,2024 decreased$685 million,or 3.1%,compared to the same period last year.As more fully described below in Operating Expenses,this decrease was primarily due to interes

202、t rate impacts on workers compensation fair-value adjustments and lower transportation costs,partially offset by inflationary impacts on compensation costs and retirement costs.Overall,we reported a net loss of$1.5 billion for the three months ended March 31,2024,compared to a net loss of$2.5 billio

203、n for the same period last year.Six Months Ended March 31,2024 Our operating revenue for the six months ended March 31,2024 increased$525 million,or 1.3%,compared to the same period last year.As more fully described below in Operating Revenue and Volume,this increase was Quarter II,2024 Report on Fo

204、rm 10-Q United States Postal Service 22 largely due to price increases in our First-Class Mail and Marketing Mail categories and a volume increase in our Shipping and Packages category.However,these price increases were partially offset by declining volumes in our mail service categories during the

205、six-month period.Our operating expenses for the six months ended March 31,2024 increased$426 million,or 1.0%,compared to the same period last year.As more fully described below in Operating Expenses,this increase was primarily due to inflationary increases on compensation costs,retirement costs and

206、other operating costs,partially offset by lower transportation costs.Overall,we reported a net loss of$3.5 billion for the six months ended March 31,2024,which is unchanged when compared to the same period last year.Non-GAAP Measures In the day-to-day operation of our business,we focus on costs that

207、 can be managed in the course of normal business operations,such as salaries and transportation.We use various non-GAAP measures to help us better manage our business.However,these non-GAAP measures should not be considered a substitute for net loss and other GAAP reporting measures.We calculate con

208、trollable(loss)income,a non-GAAP measure,by excluding the workers compensation non-cash expenses driven by actuarial revaluation and discount rate changes,which can fluctuate significantly and over which we have no control.We also exclude the amortization of unfunded pension liabilities.The variance

209、 in these expenses depends primarily on factors over which we have no control,such as changes in projected discount rates and inflation.The following table reconciles our GAAP net loss to our non-GAAP financial measures for the three and six months ended March 31,2024 and 2023:Three Months Ended Six

210、 Months Ended March 31,March 31,(in millions)2024 2023 2024 2023 Net loss$(1,468)$(2,480)$(3,540)$(3,508)1Workers compensation non-cash(benefit)expense(224)732 945 697 2CSRS unfunded liability amortization expense800 775 1,600 1,550 3FERS unfunded liability amortization expense575 475 1,150 950 Cont

211、rollable(loss)income$(317)$(498)$155$(311)1 Represents workers compensation non-cash(benefit)expense resulting from fluctuations in discount rates,changes in assumptions,valuation of new claims,revaluation of existing claims,and the administrative fee paid to DOL,less current year claim payments.2 E

212、xpense for the accrual for the annual payment due to OPM by September 30 of the respective fiscal year,to amortize the unfunded CSRS retirement obligation.Payments are to be made through 2043 based on the OPM invoices.3 Expense for the accrual for the annual payment due to OPM by September 30 of the

213、 respective fiscal year,to amortize the unfunded FERS retirement obligation.Payments are to be made over a 30-year rolling period based on the OPM invoices.Our controllable loss decreased$181 million for the three months ended March 31,2024,compared to the same period last year.The decrease was driv

214、en by the$410 million increase in operating revenue and lower transportation expense of$285 million,partially offset by higher compensation and benefit expenses of$359 million.Our controllable income for the six months ended March 31,2024,increased$466 million compared to the controllable loss we ha

215、d in the same period last year.The increase was driven by lower transportation expense of$773 million and the$525 million increase in operating revenue,partially offset by higher compensation and benefit expenses of$352 million and higher other operating expenses of$252 million.These items are discu

216、ssed in greater detail in Operating Revenue and Volume and Operating Expenses below.Quarter II,2024 Report on Form 10-Q United States Postal Service 23 OPERATING REVENUE AND VOLUME We generate the vast majority of our revenue through the sale of products and services associated with the processing a

217、nd delivery of various types of mail and packages,both domestically and internationally.We continue to grow our revenue through optimization of our pricing strategies and effective use of our pricing authority,as outlined in the Delivering for America plan.Revenue for each mail class is highly corre

218、lated with its volume processed and delivered,although revenue per product varies by service category.Although we operate as a single segment,we monitor and report revenue by mail classes,products,and shapes.We use the following broad service categories to describe and report on our performance:Firs

219、t-Class Mail,Marketing Mail,Shipping and Packages,International Mail,Periodicals,and other services.Additional information on these service categories can be found in Part I,Item 1.Business,Services and Part II,Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operatio

220、ns,Results of Operations,Operating Revenue and Volume in our 2023 Annual Report.The following table summarizes our operating revenue and volume for the three and six months ended March 31,2024 and 2023 by each service category:Three Months Ended Six Months Ended March 31,March 31,(in millions)2024 2

221、023 2024 2023 Operating Revenue:First-Class Mail1 Marketing Mail2 Shipping and Packages3 International$6,590 3,653 7,711 366$6,310 3,579 7,622 400$13,318 7,781 16,790 802$12,867 7,942 16,462 861 Periodicals 221 226 460 465 Other4 1,171 1,165 2,175 2,204 Total operating revenue Volume:$19,712$19,302$

222、41,326$40,801 First-Class Mail1 Marketing Mail2 Shipping and Packages3 International 11,678 13,814 1,714 75 11,939 14,096 1,689 82 23,606 29,336 3,749 167 24,571 32,031 3,626 187 Periodicals Other5 671 59 737 67 1,403 253 1,538 257 Total volume 28,011 28,610 58,514 62,210 Note:Prior period amounts f

223、or certain service categories include reclassifications of amounts amongst service categories to conform to current period presentation.These reclassifications are immaterial for each affected category and have no effect on total operating revenue for the period.These reclassifications are required

224、by Postal Service regulatory requirements and are included in this document for consistency amongst publicly available information.1 Excludes First-Class Package Service-Retail and First-Class Package Service-Commercial.2 Excludes Marketing Mail Parcels.3 Includes Priority Mail,USPS Retail Ground,Pa

225、rcel Select Mail,Parcel Return Service Mail,Marketing Mail Parcels,Package Service Mail,First-Class Package Service-Retail,First-Class Package Service-Commercial and Priority Mail Express.USPS Retail Ground,Parcel Select Ground(a component of Parcel Select Mail),First-Class Package Service-Retail,an

226、d First-Class Package Service-Commercial were retired in July 2023 and replaced by USPS Ground Advantage.4 Includes PO Box and Caller services,Certified Mail,Return Receipts,Insurance,Other Ancillary Services,Shipping and Mailing Supplies,Collect on Delivery,Registered Mail,Stamped Envelopes and Car

227、ds,Money Orders and other services.Also includes revenue other than postage associated with COVID-19 test distribution.5 Includes Postal Service internal mail and free mail provided to certain congressionally mandated groups.Revenue for the three and six months ended March 31,2024 and 2023 was impac

228、ted by the following pricing changes:From October 2,2022 through January 22,2023,we implemented time-limited peak season price increases on certain Shipping and Packages subcategories;Quarter II,2024 Report on Form 10-Q United States Postal Service 24 On January 22,2023,we increased prices on certai

229、n Market-Dominant services by an average of 4.2%to offset rising inflation and increased prices on certain Competitive services,with the average price adjustments for these services varying by product in accordance with market conditions;On July 9,2023,we increased prices on certain Market-Dominant

230、services by an average of 5.4%to offset rising inflation;and On January 21,2024,we increased prices for certain Market-Dominant services by an average of 2.0%.On April 9,2024,we filed with the PRC notice of our intent to increase prices for certain mailing services to help achieve the financial stab

231、ility sought by our Delivering for America plan.The average proposed price increase is 7.8%for certain Market-Dominant services and,subject to PRC favorable review of this plan,is scheduled to take effect on July 14,2024.As of the date of this report,the PRC has not completed its review of this pric

232、e increase plan.Although revenue and volume are generally linked to the strength of the U.S.economy and changes in how our customers use mail and packages,we have proactively targeted opportunities to grow our business.We continue to focus on our customers needs and have increased our marketing inve

233、stment in mail and package innovation.However,we also recognize that revenue growth is constrained by electronic media,laws and regulations restricting the types of products and services we may offer to our customers,the prices we charge them,and the speed with which we can bring new services to mar

234、ket.First-Class Mail For the three months ended March 31,2024,First-Class Mail revenue increased$280 million,or 4.4%,on a volume decline of 261 million pieces,or 2.2%,compared to the same period last year.For the six months ended March 31,2024,First-Class Mail revenue increased$451 million,or 3.5%,o

235、n a volume decline of 1.0 billion pieces,or 3.9%,compared to the same period last year.Revenue grew despite the volume declines for the three and six months ended March 31,2024,due to the price increases,as noted above.The most significant factor contributing to the declining trend in First-Class Ma

236、il volume is the on-going migration from mail to electronic communication and transaction alternatives.Marketing Mail For the three months ended March 31,2024,Marketing Mail revenue increased$74 million,or 2.1%,on a volume decline of 282 million pieces,or 2.0%,respectively,compared to the same perio

237、d last year.For the six months ended March 31,2024,Marketing Mail revenue decreased$161 million,or 2.0%,and volume decreased 2.7 billion pieces,or 8.4%,respectively,compared to the same period last year.For the three months ended March 31,2024,our revenue and volume from political and election mail,

238、a component of Marketing Mail,increased by over$100 million and 400 million pieces,respectively,compared to the same period last year.During the three-month period we are beginning to see the effects of higher revenue and volume for political and election mail associated with the 2024 primary electi

239、ons ahead of the general election.Absent the impact of these cyclical mailings,Marketing Mails adjusted results for the three months ended March 31,2024,would have been decreased revenue of$26 million,or 0.7%,and decreased volume of 682 million pieces,or 4.8%,respectively,compared to the same period

240、 last year.For the six months ended March 31,2024,our revenue and volume from political and election mail decreased by nearly$175 million and nearly 1.0 billion pieces,respectively,compared to the same period last year.During the previous year,Marketing Mail benefited from higher revenue and volume

241、for political and election mail associated with the 2022 mid-term elections.Absent the impact of these cyclical mailings,Marketing Mails adjusted results for the six months ended March 31,2024,would have been increased revenue of$14 million,or 0.2%,and decreased volume of 1.7 billion pieces,or 5.3%,

242、respectively,compared to the same period last year.Marketing Mail has been challenged by commercial mailers increasing use of digital and mobile advertising,which was accelerated by the pandemic,and a higher inflationary environment affecting print media production costs.Nevertheless,this category h

243、as generally proven to be a resilient marketing channel,and its value to U.S.businesses remains strong due to healthy customer returns on investment and better data and technology integration.Quarter II,2024 Report on Form 10-Q United States Postal Service 25 Shipping and Packages Our Shipping and P

244、ackages business is subject to intense competition.In-sourcing from our major customers,major e-commerce retailers,and other competitors continues to grow.Our ability to remain competitive and maintain or grow our shipping services market share significantly impacts both revenue and volume.The resul

245、ts for our Shipping and Packages category for the three and six months ended March 31,2024 and 2023 generally reflect our successful efforts to compete in shipping services,including last-mile e-commerce fulfillment markets and Sunday delivery,as well as end-to-end markets,driven by consumers contin

246、ued use of online shopping.As part of our ongoing commitment to respond to customer needs,in July 2023,we launched an improved affordable ground product,USPS Ground Advantage,that features two-to-five-day service standards for packages up to 70 pounds,replacing our retired First-Class Package Servic

247、es subcategory and several other service offerings.The following table summarizes our operating revenue and volume for Shipping and Packages for the three and six months ended March 31,2024 and 2023,by each service subcategory:Three Months Ended Six Months Ended(in millions)March 31,March 31,2024 20

248、23 2024 2023 Shipping and Packages Revenue:Priority Mail Services1$1,945$3,011$4,434$6,630 Parcel Services2 2,447 2,530 5,468 5,421 USPS Ground Advantage3 3,087 6,415 First-Class Package Services4 1,849 3,945 Package Services 232 232 473 466 Total Shipping and Packages revenue$7,711$7,622$16,790$16,

249、462 Shipping and Packages Volume:Priority Mail Services1 180 274 416 594 Parcel Services2 868 868 1,937 1,880 USPS Ground Advantage3 554 1,168 First-Class Package Services4 434 920 Package Services 112 113 228 232 Total Shipping and Packages volume 1,714 1,689 3,749 3,626 1 Includes Priority Mail,Pr

250、iority Mail Express,and USPS Retail Ground.USPS Retail Ground was retired in July 2023.2 Includes Parcel Select,Parcel Return,and Marketing Mail Parcels.3 Launched in July 2023.4 Includes First-Class Package Service-Retail and First-Class Package Service-Commercial.These shipping offerings were reti

251、red in July 2023.For the three months ended March 31,2024,Shipping and Packages revenue and volume increased$89 million,or 1.2%,and 25 million pieces,or 1.5%,respectively,compared to the same period last year.For the six months ended March 31,2024,Shipping and Packages revenue and volume increased$3

252、28 million,or 2.0%,and 123 million pieces,or 3.4%,respectively,compared to the same period last year.Each of the services within the Shipping and Packages category has its own unique opportunities and challenges:Our Priority Mail Services subcategory can be more price sensitive than other services a

253、nd it continues to face intense competition and an industry-wide trend away from expedited products.Priority Mail Services volume declined 34.3%and 30.0%for the three and six months ended March 31,2024,respectively,compared to the same periods last year;Our Parcel Services subcategory largely consis

254、ts of last-mile deliveries,offered to large bulk shippers that perform their own sorting before conveying parcels to us for processing and/or delivery deeper into Quarter II,2024 Report on Form 10-Q United States Postal Service 26 our network.This is our lowest-priced Shipping and Packages service a

255、nd produces a lower-contribution per piece when compared to many of our other services.Parcel Services volume was flat for the three months ended March 31,2024,and increased 3.0%for the six months ended March 31,2024,compared to the same periods last year;Our USPS Ground Advantage sub-category,launc

256、hed in July 2023,has experienced wide adoption with both existing and new consumer and commercial customers.While USPS Ground Advantage promises to continue to meet market needs and offer significant value,there has been heavy competition in the market to challenge its growth.USPS Ground Advantage a

257、nchors our shipping portfolio,and our focus is to consistently enhance the product to maximize its value,to thereby ensure long-term growth and customer utilization;Our First-Class Package Services sub-category,which was the lowest-priced unrestricted end-to-end shipping option in the marketplace,wa

258、s retired in July 2023 and subsumed into USPS Ground Advantage;and Our Package Services category is the only Market-Dominant service within Shipping and Packages.As such,this service has historically followed trends more similar to our other Market-Dominant products,with much larger volume declines

259、than our other Shipping and Packages subcategories.Package Services volume declined 0.9%and 1.7%for the three and six months ended March 31,2024,respectively,compared to the same periods last year.International Mail For the three months ended March 31,2024,international mail and package revenue decr

260、eased 8.5%,on a volume decline of 8.5%,compared to the same period last year.For the six months ended March 31,2024,international mail and package revenue decreased 6.9%,on a volume decline of 10.7%,compared to the same period last year.The decline in volume was due to various competitive pricing,po

261、litical,and economic factors.Revenue for the International Mail category decreased,largely as a result of the volume decline due to shifts in the mix of services provided,though revenue declined at a lesser rate due to price increases.Additionally,the overall contribution margin per revenue dollar f

262、or the International Mail category increased,despite the revenue and volume declines.Periodicals For the three months ended March 31,2024,Periodicals revenue decreased 2.2%,on a volume decline of 9.0%,compared to the same period last year.For the six months ended March 31,2024,Periodicals revenue de

263、creased 1.1%,on a volume decline of 8.8%,compared to the same period last year.The declining volume is consistent with the systemic decline related to the decade-long trend away from hard-copy reading behavior and the shift of advertising away from print.We expect the Periodicals category to continu

264、e to decline as electronic content has gained a significant portion of this market share.OPERATING EXPENSES In an effort to align our resources with anticipated future mail and package volume,we continue to aggressively manage operating expenses under managements control.We originally designed our m

265、ail processing and distribution network to provide delivery service of First-Class Mail within specified delivery areas for a much higher volume of mail than we are required to process and deliver today,and the networks legacy capabilities are not well aligned to todays mail and package mix and volu

266、me.Consequently,certain of our processing and distribution facilities and our transportation continue to operate at less than full capacity.Our challenge to contain costs is also compounded by the increasing number of delivery points,which drives up delivery costs.When combined with lower mail volum

267、e,this has resulted in a drop in the average number of pieces delivered per delivery point per day from 5.5 pieces in 2007 to 2.6 pieces in 2023,a decline of 53%.Compensation and Benefits Compensation and benefits,our largest operating expense category,is significantly impacted by the terms of our c

268、ollective bargaining agreements.At March 31,2024,92%of our employees are covered by collective bargaining agreements.For additional information,see Item 1.Financial Statements,Notes to Unaudited Financial Statements,Note 8-Commitments and Contingencies in this document and Part I,Item 1.Business,Qua

269、rter II,2024 Report on Form 10-Q United States Postal Service 27 Employees and Part II,Item 8.Financial Statements and Supplementary Data,Notes to Financial Statements,Note 11-Commitments and Contingencies in our 2023 Annual Report.Our compensation and benefits expense consists of costs related to o

270、ur active career and pre-career employees other than retirement costs associated with U.S.government defined benefit pension programs and retiree health benefits costs,which are further discussed in Retirement Benefits and Retiree Health Benefits,respectively.The following table presents compensatio

271、n and benefits expense for the three and six months ended March 31,2024 and 2023:Three Months Ended Six Months Ended March 31,March 31,(in millions)2024 2023 2024 2023 Compensation$10,805$10,488$22,340$22,104 Employee health benefits 1,404 1,362 2,764 2,648 Social Security 635 639 1,291 1,311 Thrift

272、 Savings Plan 370 362 757 737 Other 82 86 179 179 Total compensation and benefits$13,296$12,937$27,331$26,979 Overall,our compensation and benefits expense increased 2.8%and 1.3%for three and six months ended March 31,2024,respectively,compared to the same periods last year.While contractual wages i

273、ncreased as a result of the inflationary impacts on related COLA,it was partially offset by the lower number of work hours in the six-month period,as discussed below.Work Hours Work hours are a significant component of compensation expense.We are committed to minimizing costs by using the appropriat

274、e mix of work hours based on the complement and the assessment of relative cost for each work hour type.In some instances,the use of overtime hours may be necessary to meet service standard commitments and obligations for mail delivery or to serve as a more cost-effective option.In most instances,th

275、e compensation for an overtime hour is less than the cost of a straight-time hour as adding employees results in additional costs for hiring,training,and benefits.Furthermore,certain benefit costs are only calculated as a percentage of basic pay and do not increase with higher overtime pay.For the t

276、hree months ended March 31,2024,total work hours were 284 million,which is essentially flat compared to the same period last year.For the six months ended March 31,2024,total work hours were 581 million,a decrease of 8 million hours,or 1.4%,compared to the same period last year,with the decrease ach

277、ieved largely from fewer overtime hours.Workforce Composition The number of career employees at March 31,2024 was 531,500,an increase of 12,500 employees,or 2.4%,compared to the same date a year ago.The number of pre-career employees at March 31,2024 was 114,000,a decrease of 6,000 employees,or 5.0%

278、,compared to the same date a year ago.We continue to convert employees from pre-career to career status,consistent with our Delivering for America plan,to create a stable and empowered workforce with the opportunity for career development and growth for all employees.Retirement Benefits We participa

279、te in CSRS and FERS,federal employee defined pension benefit programs administered by OPM.Our retirement benefits expense includes statutorily required contributions to amortize the unfunded portion of these programs and a percentage of basic pay for our active employees,as established by OPM.Quarte

280、r II,2024 Report on Form 10-Q United States Postal Service 28 For the three and six months ended March 31,2024,our retirement benefits expense increased 5.3%and 5.2%,respectively,compared to the same periods last year,due to the inflationary impact on amortization calculations for the CSRS and FERS

281、unfunded retirement benefits.For additional information,see Item 1.Financial Statements,Notes to Unaudited Financial Statements,Note 9-Retirement Plans,in this document and Part II,Item 8.Financial Statements and Supplementary Data,and Supplementary Data,Notes to Financial Statements,Note 12-Retirem

282、ent Plans in our 2023 Annual Report.Retiree Health Benefits We participate in federal employee benefit programs for retiree health benefits.The PSRHBF will continue to pay annuitant premiums for our annuitants until the fund is exhausted.Once exhausted,we will be required to contribute to the PSRHBF

283、 based on a pay-as-you-go method,similar to most other federal agencies.We will not incur additional retiree health benefit costs until either OPMs annual calculation results in a top-up payment,expected to occur in 2026,or the PSRHBF is exhausted and we are required to make contributions to OPM for

284、 annuitant premiums.For additional information,see Item 1.Financial Statements,Notes to Unaudited Financial Statements,Note 10-Health Benefits Plans,Retirees.Workers Compensation Our employees injured on the job are covered by the FECA,administered by the DOLs OWCP,as described in our 2023 Annual Re

285、port.On a daily basis we focus on costs that can be managed in the course of normal business operations.Certain aspects of workers compensation can be managed through human resource initiatives,safety measures and training.Other workers compensation costs cannot be managed in the course of normal bu

286、siness operations and are less predictable,including expenses caused by actuarial revaluation and discount rate changes.We subtract the cash payments made by the DOL on behalf of workers compensation obligations,which are relatively predictable,from total workers compensation expense in order to det

287、ermine the non-cash component of workers compensation expense,a non-GAAP financial measure.The following table presents the components of workers compensation expense,including the cash payments made by the DOL on behalf of our employees for workers compensation obligations,for the three and six mon

288、ths ended March 31,2024 and 2023:Three Months Ended Six Months Ended March 31,March 31,(in millions)2024 2023 2024 2023 Impact of discount rate changes$(414)$529$567$407 Actuarial revaluation of existing cases 240 241 554 443 Cost of new cases 312 282 596 530 Administrative fee 24 23 48 46 Total wor

289、kers compensation expense$162$1,075$1,765$1,426 Less cash payments made by the DOL on behalf of workers compensation obligations(386)(343)(820)(729)Total workers compensation non-cash(benefit)expense$(224)$732$945$697 For the three and six months ended March 31,2024,the portion of workers compensati

290、on expense driven by discount rate changes decreased$943 million and increased$160 million,respectively,compared to the same periods last year.The combined costs of new workers compensation cases and revaluation of existing workers compensation cases increased$29 million and$177 million for the thre

291、e and six months ended March 31,2024,respectively,compared to the same periods last year.Changes in actuarial valuation are primarily attributable to the Quarter II,2024 Report on Form 10-Q United States Postal Service 29 combined impacts of routine changes in actuarial estimation,the progression of

292、 existing cases,and updated COLA assumptions,which are largely outside of managements control.For additional information,see Item 1.Financial Statements,Notes to Unaudited Financial Statements,Note 11-Workers Compensation in this document and Part II,Item 8.Financial Statements and Supplementary Dat

293、a,Notes to Financial Statements,Note 14-Workers Compensation in our 2023 Annual Report.Transportation Transportation expense includes the costs we incur to transport mail and packages between facilities,comprising highway,air,and international transportation contracts,plus contract delivery services

294、.We rely on third-parties under highway contract routes for the significant majority of long-haul transportation services between facilities.Furthermore,we do not own or operate aircraft,and we rely on third parties for the air transportation service required to deliver our mail and packages to vari

295、ous destinations within the U.S.and abroad.With the exception of contract delivery services,our costs to deliver mail and other products to end delivery points are not included within Transportation but in Compensation and benefits for employee costs and in Other operating expenses for fuel,vehicle

296、maintenance and repair,and other costs in the accompanying unaudited Statements of Operations.Furthermore,transportation expense does not include the compensation and related costs of employees responsible for transporting mail and packages between closely located facilities.Variations in the volume

297、 and weight of mail and packages transported,the mode of transportation used,and fuel prices have significant impacts on transportation expense.Overall,transportation expense decreased 11.7%and 14.2%for the three and six months ended March 31,2024,respectively,compared to the same periods last year.

298、The components of transportation expense for the three and six months ended March 31,2024 and 2023 are presented in the following table:Three Months Ended Six Months Ended March 31,March 31,(in millions)2024 2023 2024 2023 Highway$1,476$1,536$3,188$3,415 Air 574 773 1,278 1,778 International 87 111

299、187 226 Other 8 10 16 23 Total transportation expense$2,145$2,430$4,669$5,442 Highway transportation expense decreased 3.9%and 6.6%for the three and six months ended March 31,2024,respectively,compared to the same periods last year,primarily due to lower average diesel fuel prices and our optimizati

300、on of peak-season contracts.Consistent with the tenet of our Delivering for America plan to optimize our transportation networks,our changes in service standards have further facilitated the shift of package volume from air to highway transportation when more economical and allowing for improved rel

301、iability and service performance.Air transportation expense decreased 25.7%and 28.1%for the three and six months ended March 31,2024,respectively,compared to the same periods last year.This decrease was primarily due to the shift of certain package volume to highway transportation and the impact of

302、lower average jet fuel prices.Quarter II,2024 Report on Form 10-Q United States Postal Service 30 Other Operating Expenses Other operating expenses for the three and six months ended March 31,2024 and 2023,are detailed in the following table:Three Months Ended Six Months Ended March 31,March 31,(in

303、millions)2024 2023 2024 2023 Supplies and services$849$870$1,723$1,696 Depreciation and amortization 477 443 940 868 Rent and utilities 542 535 1,057 1,036 Information technology and communications 363 304 638 561 Vehicle maintenance service 183 213 394 408 Rural carrier equipment maintenance 147 15

304、1 307 310 Fuel-delivery vehicles 169 182 355 382 Miscellaneous other 350 359 728 629 Total other operating expenses$3,080$3,057$6,142$5,890 Total other operating expenses remained flat for the three months ended March 31,2024,and increased 4.3%for the six months ended March 31,2024,compared to the s

305、ame periods last year.The period-over-period increases in almost all components of other operating expenses for the six months ended March 31,2024 reflect emphasis on modernizing information technology systems and ongoing inflation.NON-OPERATING REVENUES AND EXPENSES Interest and Investment Income W

306、e generate income from investments in securities issued by the U.S.Treasury.Investment interest income was$235 million and$484 million for the three and six months ended March 31,2024,respectively,compared to$227 million and$433 million for the same periods last year.The increase was due to higher a

307、verage interest rates and our higher volume of investments in longer-term Treasury securities.Interest Expense Interest expense was$133 million and$266 million for the three and six months ended March 31,2024,respectively,compared to$90 million and$186 million for the same periods last year.The incr

308、ease was due to higher average interest rates and higher outstanding debt.As of March 31,2024,we had$1.0 billion in short-term debt and$13.2 billion in long-term debt.We finance a portion of our debt at longer-term fixed-rates to decrease our interest rate risk and interest expense volatility in fut

309、ure years and a portion of our debt at floating-rates,which typically have remained below longer-term fixed rates.Floating-rates reset every three months and are impacted by interest rate volatility.LIQUIDITY AND CAPITAL RESOURCES LIQUIDITY Our liquidity consists of unrestricted cash and cash equiva

310、lents,short-term investments,plus our authorized borrowing capacity under the PRA.For additional information see Item 1.Financial Statements,Notes to Unaudited Financial Statements,Note 3-Liquidity.Our average daily liquidity balance was$20.6 billion and$23.4 billion for the six months ended March 3

311、1,2024 and 2023,respectively.CASH FLOW ANALYSIS Operating Activities Net cash provided by operating activities was$458 million for the six months ended March 31,2024,compared to$1.7 billion used in operating activities for the six months ended March 31,2023.This change in cash provided by operations

312、 was due to higher revenue and higher receipts for interest and investment income as a Quarter II,2024 Report on Form 10-Q United States Postal Service 31 result of higher interest rates,as well as lower cash expenditures for compensation and benefits,retirement benefits,transportation expenses and

313、the timing of outlays for payable and accrued expenses.Investing Activities We invested$2.2 billion in the purchase of property and equipment for the six months ended March 31,2024,which is an increase of$970 million,or 76.6%,compared to the same period last year.The increase is due to our investmen

314、ts in network infrastructure consistent with our Delivering for America plan.Our projected capital expenditures for 2024 is$3.3 billion.During the six months ended March 31,2024,we invested excess cash,when available and not immediately necessary for operations,of$9.3 billion and restricted cash of$

315、464 million in Treasury bills of various maturities ranging between six-months and one-year.Three of our short-term investments matured and were redeemed for$8.6 billion during the period,and five of our restricted investments matured and were redeemed for$2.7 billion.The remainder of the investment

316、s held had yet to mature as of the date of this report.During the same period last year,there were investments of$5.0 billion,which we made from excess cash,and maturities redeemed for$5.1 billion.Financing Activities Net cash used in financing activities was$1.1 billion for the six months ended Mar

317、ch 31,2024,compared to$402 million used in financing activities for the six months ended March 31,2023.On February 5,2024,we borrowed$500 million from the FFB on a 13-year long-term note under the terms of our note purchase agreement.On March 27,2024,we borrowed$650 million from the FFB on a 14-year

318、 long-term note under the terms of our note purchase agreement.LIQUIDITY OUTLOOK 2024 and Beyond While the enactment of the PSRA in April 2022 was a critical component of the Delivering for America plan and restoring us to financial sustainability,we continue to face systemic imbalances that make ou

319、r current operating model unsustainable.We have adequate short-term liquidity,however,as of March 31,2024,in the medium to long-term,our liquidity remains insufficient to pay all obligations,to make capital investments necessary for continuity of operations,and to prepare for unexpected contingencie

320、s.For additional information on our operating challenges and constraints and the relevant mitigating circumstances,see Item 1.Financial Statements,Notes to Unaudited Financial Statements,Note 3-Liquidity.Legally Required Obligations As previously discussed,we have estimated obligations for unfunded

321、retirement benefits of$5.1 billion due on September 30,2024.We also expect to pay the DOL approximately$1.6 billion in October 2024,representing the workers compensation claims paid by DOL for the chargeback year July 1,2023 to June 30,2024,plus the administrative fee.Capital Investments As outlined

322、 in our Delivering for America plan,our technological and physical infrastructures require extensive upgrades.To invest in these upgrades,we have planned for over$40 billion in capital investments between 2021 and 2030.We currently estimate that our required cash outlays for capital investments nece

323、ssary to modernize the network and ensure that we can continue to perform our universal service mission will amount to$1.1 billion for the remainder of 2024 and an additional$13.3 billion for years 2025 through 2028.However,these projections could change depending on the timing of investments to rep

324、lace our delivery fleet,modernize our delivery units,transform our retail locations,improve our processing facilities,and acquire or contribute to other appropriate capital assets.LEGISLATIVE UPDATE As a self-funded independent establishment of the executive branch,our business model and operations

325、have the potential to be influenced by congressional oversight and legislation.Quarter II,2024 Report on Form 10-Q United States Postal Service 32 BOARD OF GOVERNORS Consistent with our independent self-funded design,Congress intended for us to be governed by an eleven-member Board which consists of

326、 our PMG,our DPMG,and nine independent Governors.The President appoints the Governors with the advice and consent of the Senate.As of the date of this report,we have seven Presidentially appointed,Senate-confirmed Governors in office.On February 29,2024,the President submitted to the Senate the nomi

327、nation of Martin J.Walsh to serve on the Board of Governors for a term expiring December 8,2029.The nomination was referred to the Senate Homeland Security and Governmental Affairs Committee,where it awaits further action.APPROPRIATIONS On March 9,2024,the President signed H.R.4366,the Consolidated

328、Appropriations Act,2024,enacted as Public Law 118-42.The law provides government funding for the Departments of Agriculture,Interior,Transportation,Housing and Urban Development,Veterans Affairs,Justice,Commerce,and Energy and other independent agencies,expiring on September 30,2024.The bill include

329、s a modification of the COFA,which are international agreements between the U.S.government and three countries,the Federated States of Micronesia,the Republic of Palau,and the Republic of the Marshall Islands,collectively known as the FAS.For our purposes,the COFA governs the mail service relationsh

330、ips between us and the FAS.The modified agreements will provide$634 million over the next 20 years for us to provide the mail service to the FAS.On March 23,2024,the President signed H.R.2882,the Further Consolidated Appropriations Act,2024,enacted as Public Law 118-47.The law provides government fu

331、nding for the Departments of Defense,Treasury,Homeland Security,Labor,Health and Human Services,Education,and State and several related and independent agencies,expiring on September 30,2024.The bill includes$49.75 million in funding for us to provide for free mail for the blind and overseas voting.

332、LEGISLATION On March 12,2024,the Protect Our Letter Carriers Act of 2024(H.R.7629)was introduced in the House.This bill would facilitate the implementation of security measures undertaken by us by appropriating$1.4 billion for each of fiscal years 2025 through 2029 to install high security collectio

333、n boxes and replace arrow keys with electronic versions.H.R.7629 designates an Assistant U.S,Attorney in every U.S.Attorneys office to coordinate and supervise the investigation and prosecution of alleged offenses committed against postal workers.The bill would also amend sentencing guidelines so that any assault or robbery committed against a letter carrier would use the same sentencing guideline