USPS FY 2018 first quarter results – Urgent need remains for postal reform legislation

The Postal Service agrees with the PRC’s conclusion that the current consumer price index price cap does not work and needs to be changed because it does not allow USPS to achieve its mission of providing prompt, reliable and efficient universal postal services in a financially sustainable manner.

  • Urgent need remains for postal reform legislation and regulatory changes
  • Mail declines not offset by strong package growth
  • Accelerated downward trend of primary source of revenue continues

WASHINGTON – The U.S. Postal Service reported controllable income for the first quarter 2018 (October 1, 2017 – December 31, 2017) of $353 million, compared to controllable income of $522 million for the same period last year. This decrease was largely driven by volume declines in First-Class and Marketing Mail, higher normal cost of retiree health benefits expenses of $140 million and higher transportation expenses of $109 million, partially offset by a reduction in compensation and benefits expenses of $91 million.

uspshq2

Total revenue for the quarter was $19.2 billion, essentially unchanged compared to the same quarter last year. Revenue from First-Class Mail and Marketing Mail decreased $309 million and $248 million, respectively, due largely to lower volumes. Revenue from the Shipping and Packages business increased $505 million, or 9.3 percent, during the quarter.

Operating expenses for the quarter were $19.7 billion, an increase of $2.0 billion, or 11.0%, compared to the same period last year. This was largely driven by an increase in workers’ compensation expense of $1.4 billion, resulting from changes in interest rates. Also contributing to this increase were increases in unfunded retirement benefit costs and retiree health benefits expense of $293 million and $210 million, respectively, driven by changes in actuarial assumptions.

Net loss for the first quarter totaled $540 million, compared to net income of $1.4 billion, for the same period last year. The first quarter, which includes the holiday mailing season, is typically the Postal Service’s strongest quarter of the fiscal year.

In the first quarter 2018, package volumes grew by 111 million pieces, or approximately 7%, while mail volumes declined by approximately 2.0 billion pieces, or approximately 5%, continuing a multi-year trend of increasing package volume and declining letter volumes. The Postal Service set a record on December 18th when more than 37 million packages were delivered, the most packages delivered in a single day in the organization’s more than 240 year history.

“Although we continue to win customers and grow our package business, these gains are not sufficient to offset continuing declines in our mail business, which is our main source of revenue and contribution,” said Postmaster General and CEO Megan J. Brennan. “We will continue to do everything within our control to improve operating efficiencies, manage expenses, expand our use of technology and keep mail affordable, but these actions must be combined with regulatory and legislative changes.”

Brennan added that the Postal Service’s abilities to react to declining volumes by controlling costs or growing revenue through pricing flexibility are constrained by current law. These legal constraints are widening a systematic financial imbalance.

The Postal Service’s long-term financial stability also depends on the Postal Regulatory Commission (PRC) establishing a new pricing system that enables the organization to generate sufficient revenues to cover our costs. The Postal Service agrees with the conclusion of the PRC that the current Consumer Price Index price cap does not work and needs to be changed, because it does not enable the Postal Service to achieve its mission of providing prompt, reliable, and efficient universal postal services to the American people in a financially sustainable manner.

“Continuing mail declines that totaled 2 billion pieces in this quarter place additional financial pressure on us, underscoring the need for change,” said Chief Financial Officer Joseph Corbett.

First Quarter 2018 Operating Revenue and Volume by Service Category Compared to Prior Year
The following presents revenue and volume by category for the three months ended December 31, 2017, and 2016:

Revenue

Volume

(revenue in $ millions; volume in millions of pieces)

2017

2016

2017

2016

Service Category
First-Class Mail $

6,683

$

6,992

15,248

15,894

Marketing Mail

4,448

4,696

21,048

22,361

Shipping and Packages

5,917

5,412

1,718

1,607

International

838

770

279

285

Periodicals

338

361

1,316

1,369

Other

928

961

93

104

Total operating revenue and volume $

19,152

$

19,192

39,702

41,620

 

Selected First Quarter 2018 Results of Operations
The following table presents results of operations for the three months ended December 31, 2017, and 2016:

(results in $ millions)

2017

2016

Operating revenue $

19,152

$

19,192

Other revenue

12

9

Total revenue $

19,164

$

19,201

Total operating expenses $

19,666

$

17,716

Interest and investment income (expense), net

(38)

(47)

Net (loss) income $

(540

) $

1,438

 

Controllable Income
This news release references controllable income, which is not calculated and presented in accordance with accounting principles generally accepted in the United States (GAAP). Controllable income is a non-GAAP financial measure defined as net (loss) income adjusted for items outside of management’s control and non-recurring items. These adjustments include workers’ compensation expenses caused by actuarial revaluation and discount rate changes, and the amortization of PSRHBF, CSRS and FERS unfunded liabilities.

The following table reconciles the Postal Service’s GAAP net (loss) income 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, 2017, and 2016:

(results in $ millions)

2017

2016

Net (loss) income $

(540)

$

1,438

PSRHBF unfunded liability amortization expense1

297

227

Change in workers’ compensation liability resulting from fluctuations in discount rates

(1,670)

Other change in workers’ compensation liability2

(67)

157

CSRS unfunded liability amortization expense3

434

308

FERS unfunded liability amortization expense4

229

62

Controllable income $

353

$

522

1 Expense for the accrual for the annual payment due to the PSRHBF by September 30 of the respective fiscal year, based on Postal Service estimates to OPM’s preliminary calculations with updated discount rate assumptions.
2 Net amounts include changes in assumptions, as well as the valuation of new claims and revaluation of existing claims, less current year claim payments.
3 Expense for the accrual for the annual payment due to OPM by September 30 of the respective fiscal year, based on information provided by OPM, to amortize the unfunded CSRS retirement obligation. Payments are to be made in equal installments through 2043.
4 Expense for the accrual for the annual payment due to OPM by September 30 of the respective fiscal year, based on information provided by OPM, to amortize the unfunded FERS retirement obligation. Payments are to be made in equal installments through 2046.

Complete financial results are available in the Form 10-Q, available at http://about.usps.com/who-we-are/financials/welcome.htm.

Financial Briefing
Postmaster General and CEO Megan J. Brennan and Chief Financial Officer and Executive Vice President Joseph Corbett will host a telephone/Web conference call to discuss the financial results in more detail. The call will begin at 10:30 am ET on February 9, 2018, and is open to news media and all other interested parties.

How to Participate:
US/Canada Attendee Dial-in: 844-340-4622 Conference ID: 1475169

Attendee Direct URL: https://usps.webex.com/usps/onstage/g.php?MTID=ef48820aeaa353c88133eef97ceea011e

If you cannot join using the direct link above, please use the alternate logins below:
Alternate URL: https://usps.webex.com
Event Number: 997 229 291

The briefing will also be available on live audio webcast (listen only) at:
http://about.usps.com/news/electronic-press-kits/cfo/welcome.htm.

The Postal Service receives no tax dollars for operating expenses and relies on the sale of postage, products and services to fund its operations.

18 thoughts on “USPS FY 2018 first quarter results – Urgent need remains for postal reform legislation

  1. Time to get rid of the dead weight toolbags down
    in the spa in DC. On average there are 3 toolbags
    doing the same job. Get rid of 204bs and send them
    back to the craft. How many Mdos/Sdos standing around
    drinking coffee and smoking does it take to ruin the PO?
    Get Meghen and the posse away from the buffet and save
    millions. Stop sending empty trailers. Stop wasting money
    on useless programs. On and on we go. Waste on a daily
    basis. The toolbags have to go. Hire real management.

  2. the “REAL” urgent needs appears to be New Management……..even a blind man can see that!

  3. Ok IOD Queen Megan….you boast about being a Sloan Fellow of the MIT Business School and all you got is you need the freedom to raise prices?

    Why don’t you follow what the CEO that’s ass-raping you is doing….yeah, you’re boy Jeff Bezos….he’s laying off thousands of useless management.

    You’re clueless Megan….go back to slinging mail.

  4. lets see now-MHA & CCA’s & PSE’s and 1% raise from three different postal company unions. I see said the blind man. just negotiate my 40K buyout you do nothing fools & tools of a phony union. union thugs at their finest. watching this place implode is like watching paint dry.

  5. kind of like the Capt of the Titanic saying not to worry as he paddles away in a lifeboat. just got to love the US Postal Circus…..going, going, ……….gone!

    Pan American Airways
    Eastern Airlines
    Laker Airways
    US Postal Circus

    • red ink flowing for 12 straight years? Harvard Business School needs to do a case study of that amazing business feat. IOD Brennen and her band of clueless bureaucrats. wonder what Harvard Business School would think about about 12 straight years of loss and giving themselves criminal bonus money? a service business cutting the workers who provide the S in service, while keeping all the mismanagement in place. seems PMG IOD Brennen should be in a cell next to Comey from the FBI and the gang of criminals running the VA Hospital System into the ground. now you know why people scream about having small government. hey IOD Brennen how is that Function 1 Scheduler working out for you fool!

  6. ALWAYS A LOSS BUT THE DOORS ARE OPEN ..HOW DO YOU LOSE MONEY WHEN YOU HAVE CUT PAYROLL BY 50 PERCENT IN THE LAST 15 YEARS…JUST IN THAT YOU SAVED 20 BILLION DOLLARS …….850,000 PEOPLE TO 450,000 PEOPLE . OH I FORGOT THIS IS A CONTRACT YEAR……….LOL

  7. So…….. what’s the problem? Haven’t we been talking about this issue for 10 years now and nothing has changed? Sounds like a broken record to me. Still be addressing the same things 10 years from now too.

    • Jeff Bezos does not surround himself with morons like the PO does……He hires Harvard MBA’s to run his companies…………….but wait the PO has Cultural Marxist PC Diversity……..problem is that does not add to the bottom line. Harvard MBA or a Diversity King/Queen………..which one will keep you in the black?

  8. Sad thing is that look at Amazon and what could’ve been the P.O. But Congress and management destroyed the P.O. in so many ways …..mostly cause they had their heads up their butts.

  9. Some people process the mail (workers) and some don’t (freeloaders). Compare the ratio of said people with UPS or FedEx and find the problem.

  10. Revenue is flat, workload, defined as volume handled, is considerably less than a year ago yet operating expenses are considerably higher (almost $2 billion) than a year ago prompts the obvious question: why?
    It shouldn’t require almost $2 billion in additional costs to process, transport and deliver nearly 2 billion less pieces of mail even with growth in the number of delivery points and some growth in package volume! There appears to be a significant loss of efficiency and that is a management responsibility.

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