Passage of postal reform legislation in new Congress urgently needed
WASHINGTON — Excluding the effects of a $1.7 billion change in its workers’ compensation liability due to fluctuations in interest rates, the U.S. Postal Service posted a net loss of approximately $200 million for the first quarter of fiscal year 2017 (October 1, 2016 – December 31, 2016).
Controllable income for the quarter was $522 million compared to $1.3 billion for the same period last year, a decrease of $735 million. Operating revenue decreased by $155 million, and was significantly impacted by the April 2016 expiration of the exigent surcharge. If the exigent surcharge had remained in place, the Postal Service would have generated approximately $570 million in additional revenue during the quarter.
The first quarter, which includes the holiday mailing season, is typically the Postal Service’s strongest quarter of the fiscal year. The Postal Service processed and delivered a record volume of packages during the 2016 holiday season, and for the entire quarter, the Shipping and Packages business experienced revenue growth of $701 million, or 14.7 percent over the same period in the prior year.
However, this positive development in the Shipping and Packages business was offset by a decline in First-Class Mail revenue of $568 million, or 7.5 percent, due largely to the exigent surcharge expiration noted above and continuing electronic migration. Revenue from Standard Mail (renamed USPS Marketing Mail, as of January 22, 2017) decreased approximately $224 million over the prior year quarter, again due mainly to the loss of the exigent surcharge. Volume increased in political and election mail, but there was a shift in the mail mix and volume declines in other Marketing Mail products. (See Selected FY 2017 First Quarter Results of Operations table below).
Overall, the Postal Service continues to operate within an unsustainable business model because of mandated costs such as an unaffordable retiree health benefits program that is not fully integrated with Medicare, and an ineffective pricing system.
“Our current financial situation is serious, but solvable,” said Postmaster General and CEO Megan J. Brennan. “With legislation that contains broadly supported provisions to improve our business model, the Postal Service can generate total savings of $26 billion over the next five years. When combined with a favorable outcome of the recently initiated 10-year pricing system review by the Postal Regulatory Commission and continued aggressive management actions, the Postal Service would return to financial stability.”
Operating expenses decreased in the first quarter compared to the same period last year. Offsetting the $1.3 billion and $927 million declines in retiree health benefits and workers’ compensation expenses, respectively, compensation and benefits expenses increased by approximately $654 million and, transportation costs increased by $146 million. The growth in labor and transportation costs is largely due to the increase in Shipping and Packages volumes, which are more labor-intensive to process and require greater transportation capacity than mail. Transportation costs also increased to continue the significant improvement in service levels.
“Despite the loss of revenue from the expiration of the exigent surcharge and continued effects of electronic migration on First-Class Mail revenue, we continue to believe there is strength in the postal system, and that there is a path forward for us to return to financial health,” said Chief Financial Officer and Executive Vice President Joseph Corbett. “However, the Postal Service’s return to long-term financial stability is only possible when our continuing actions to improve efficiency, reduce costs and expand our use of technology are combined with our proposed legislative and regulatory reforms that together will enable us to continue to meet our universal service obligations and invest in the future of the Postal Service and the mailing industry as a whole.”
FY 2017 First Quarter Revenue and Volume by Service Category Compared to Last Year
The following presents revenue and volume by category for the three months ended December 31, 2016, and 2015:
FY 2017 Changes in Funding for Retiree Health Benefits
As referenced above, the Postal Service’s first quarter retiree health benefits expense declined by $1.3 billion compared to the same period last year. This was primarily due to changes in the Postal Service’s funding of retiree health benefits that are to take effect in 2017 according to law.
In accordance with the Postal Accountability and Enhancement Act (PAEA), beginning in 2017, the Postal Service Retiree Health Benefits Fund (PSRHBF) is to be used to fund the Postal Service’s share of retiree health benefit premiums. Additionally, Office of Personnel Management (OPM) will determine the amount of annual payments the Postal Service will need to make to amortize the PSRHBF unfunded liability. Based on a preliminary estimate of the unfunded liability provided by OPM, the Postal Service estimates that the amortization payments for the unfunded liability will be $907 million annually, and the Postal Service has accrued $227 million in the first quarter for this payment. OPM is not required to determine such amount until June 30, 2017; accordingly, the amount of the annual expense is subject to change.
The Postal Service is also obligated to begin paying the normal costs of retiree health benefits attributable to the service of Postal Service employees during the most recently ended fiscal year, which the OPM estimates is approximately $2.9 billion for the Postal Service’s fiscal year 2017.
The following table details retiree health benefits expenses, including the changes that are taking effect in fiscal year 2017, for the three months ended December 31, 2016, and 2015:
Selected FY 2017 First Quarter Results of Operations
This news release references operating revenue before the temporary exigent surcharge, which is not calculated and presented in accordance with accounting principles generally accepted in the United States (GAAP).
The following table reconciles these non-GAAP operating revenue calculations with GAAP net income for the three months ended December 31, 2016, and 2015:
Controllable Income
This news release references controllable income, which is not calculated and presented in accordance with GAAP. Controllable income is a non-GAAP financial measure defined as net income adjusted for items outside of management’s control. These adjustments include workers’ compensation expenses caused by actuarial revaluation and discount rate changes, PSRHBF prefunding expenses and the amortization of PSRHBF, CSRS and FERS unfunded liabilities.
The following table reconciles the Postal Service’s GAAP net income of $1.4 billion for the quarter to controllable income and illustrates the income from ongoing business activities without the impact of non-controllable items for the three months ended December 31, 2016, and 2015:
Complete financial results are available in the Form 10-Q, available at http://about.usps.com/who-weare/financials/welcome.htm.
the post office can be a heartless place to work for
Sands of time
Nepotism not who is qualified… End of story
Dear Hannibal lector, You seem to totally ignore the fact that the Postal Service is stuck with an artificial expenditure, it’s required to pre fund health care costs. Why not force UPS and FEDX to be burdened with the same cost? Why that wouldn’t be fair! You probably think that it’s ok to force the Postal Service to do what private co’s aren’t required to do. Those GED managers could do a lot better without the pre funding crap! Better yet, where you work should be the next employer to be forced to pre fund health care! That way everyone can say how your employer is a dud.
retodd Postal Circus has not paid into that pre-funding since 2009, PMG Donehoue and OMB even said it was a cannard. UPS and FDX can not go to the US Treasury and get 50 Billion Dollars of taxpayer funds in interest free loans like postal circushas done (they hit their limit and told to get lost….they have not paid back a dime of this taxpayer money-while UPS/FDX have to go to wall street and pay interest on loans and bonds) postal circus has a rust bucket fleet of LLV’s and Tractor Trailers while UPS/FDX each have a fleet of over 800 modern freighter jets and all that come with it, airport terminals, pilots pay, ground equipment, jp-4 jet fuel…..so compare all things and not just compare some pre-funding accounting gimic that they never pay into anyway. the true fact is FDX/UPS are just better companies, the two have smarter managers, better finances, and a better business model.once Amazon gets up to speed there will be the BIG 3……..the postal circus is doomed because President Trump is not going to carry the Billions and Billions this dump loses each year…..and he should not have to do it. The Chairman of FDX went to Harvard Business School….little IOD Megan Brennen was a IOD mailman who hitched her wagon to Donehoe’s coat tails. ROFLMFAO!!!!!!!!!!!!!!!!!!!!!!! I know….just don’t confuse me with the facts.
ps-Postal Circus has not paid a dime into “so called” pre-funding since 2009, but has managed to lose over $105 BILLION DOLLARS since 2009, nice trick. In addition to all the aircraft freight delivery related expense( don’t forget all the landing and takeoff airport slot fees todd-I know for a 747 it is around $3000 a pop each time it lands or takes off) you see UPS/FDX each have a modern fleet of ground delivery…..never see a dirty delivery truck between them. so lets go down the long list and compare/contrast UPS/FDX vs US Postal Circus.(UPS/FDX managers need a college degree to get in the door)
the tale of the tape………..UPS $105 a share………FDX $185 a share……..USPS $0.00……….first two companies make Billions and the third boondoggle loses Billions. the first two have professional managers……..the third filled with nepotism riddled loser’s who only have GED’s or worse. not very hard to explain the results of the us postal circus. first class mail is going, going, gone……and other two do a better job with packages……and Amazon wants to get in on the package delivery business action………postal circus is in deep bureaucratic do do! President Trump will get to the bottom of this money loser.
The Postal Service is “cooking their books”. They learned how to do this from PMG Donahue. He was the Chief Financial Officer for the Postal Service before taking over as PMG. I find it ironic that the government oversight committee held hearings on Postal Reform this week and now the PO is reporting another disastrous quarter and is again saying they need to have HR 756 passed and screaming at the top of their lungs that “the sky is falling”. The Postal Service is a government agency and while they are crying about not making a profit, they were never created to be a money making government agency. The PMG would do better to acknowledge this and focus on moving the mail efficiently. HR 756 is a dud. While I paid into medicare when I worked there it should be my decision if I want to PAY for medicare part b just like millions of other Americans do. It’s a shame that Postal unions and supervisory organizations think they have to add their 2 cents and agree to support HR 756. If I was a member of any of them I wouldn’t be by next week.
USPS stopped making the”pre-fund” payments,at the end 2011. And,nobody,is able to compel USPS to resume such payments. At least,as Washington,DC,has gone SO VERY”RETARDED”,especially since 2009,that only ONE Board of Postal Governors remain. Get this,there should be NINE humankinds;on that “Postal Board” And,such”mental-retardation”,only continues to increase in”DC”!!
Who wrote this article??
And what was their agenda?
If you read the actual financial statements we had a net income in the quarter of 1.4 billion dollars.
Where is that little tidbit in the article?
I guess it just didn’t fit in with “the sky is falling” narrative that was being pushed.
Alternative facts … too many tv watchers, how many managers does it take to run a station? Need less bosses more workers , fix the CBUs sooner than 2 years….
Every time a Federal court reaches a decision against Trump, or the Democrats ask for an investigation he rants “political decision”. Well the idea that the Postal Service, and only the Postal Service, must prefund health care is but a political decision. Most people don’t care about what is right or wrong, fair or unfair, they only care about what can they get away with! When the Postal Service is sold to some private business so business bastards can make lots and lots of money, it will be because of a political decision. In stead of giving Israel 3.8 billion per year for their military spend the money on the Americans health care. Israel, the same country that attacked the USS Liberty and killed 32 sailors. Why is it that Americans must be self reliant while Israel is allowed to suck off the American tax payer? It is a political decision!
Controllable Income?……..boy oh boy, don’t these money losers like to play fast and loose with professional GAAP accounting rules and practices……………..any Graduate Business School of Accounting of standing would laugh these jokers out of the room. US Postal Circus makes Ken Lay and Enron look like kindergarteners. loss of over $109 Billion since 2009………lions and tigers and bears oh my! I wonder if President Trump is going to allow this to continue?
Need to let go of Supervisors and Management……overflowed with too many doing nothing. WASTE OF MONEY
What an opinionated article! Just the facts, not your drivel please.
stop you crying and go hire a labor lawyer…..only way to prevail against these evil doers. in addition, there is no union, you have postal company unions. google the term “company union” it will match like a glove the postal unions.
Thank you, but now the Attorney Generals office has the case. I am pushingles my story now to the media and news journalist. What happened to me has happened to many others it’s called stealing.
Maybe that’s why a union business agent stole my 2 years backpay. That’s why APWU looked the other way knowing the documents shown them were Fraudulent. I had a fraud and forgery expert confirm my worst fears. I also was diagnosed with breast cancer that didnt stop the harassment and retaliation. That hasn’t stop my medical bills from piling up, financial troubles, possibly losing my home, and my recovery. I can barely afford to go to work. This job has made my life at home just as bad as work. The evidence has been turned over to the proper authorities. In the meantime l don’t feel safe at that job but can’t afford to retire. I pray for justice. It’s hard to believe they have a breast cancer stamp.
The post office doesn’t care about any of us