PRC issues USPS Financial Analysis report
The US Postal Regulatory Commission has released its Financial Analysis report for the US Postal Service (USPS) in Fiscal Year (FY) 2017.
In a statement sent to Post&Parcel yesterday (5 April), the PRC noted: “In FY 2017, the Postal Service recorded its first net loss from operations, since FY 2013, of $1.3bn, largely due to declining mail volume, the expiration of the exigent surcharge, and higher operating costs.
“However, including non-cash workers’ compensation costs and retirement expenses, the net loss from operations increases to a total net loss of $2.7bn in FY 2017.
“This is an improvement of $2.8bn compared to the total net loss in FY 2016. This improvement is the result of a $4.8bn decrease in the retiree health benefits expense, and a $3.4bn decrease in the non-cash workers’ compensation expense, offset by $2.4bn in increased expenses that resulted from provisions in the Postal Accountability and Enhancement Act (PAEA) for unfunded retirement benefit costs. Liquidity also continues to improve in FY 2017 and is at its highest level since FY 2007. However, liabilities on and off-balance sheet for pension and annuitant health benefits continue to threaten the improvements in liquidity.”
Like postal operators the world over, the USPS is still facing a decline in traditional mail as a result of digitalization.
The PRC gave the numbers to this decline: “The Postal Service experienced a decline in revenue for most of its Market Dominant products. Consumer price index-based price increases were not sufficient to offset the decline in mail volume and the reduction in additional revenue from the expiration of the exigent surcharge. Overall Market Dominant Mail and Services revenue declined 7.7% from the previous year. First-Class Mail revenue declined by 6.7% while Marketing Mail revenue declined by 5.7%. Periodicals revenue also saw a decline of 8.8%. Conversely, package services revenue increased by 0.3% compared to FY 2016.”
There were some growth, as the overall revenue for Competitive products increased by $2.2bn in FY 2017. The PRC commented: “The Competitive product price increase effective January 2017, the transfer of First-Class Mail Retail-Single-Piece from the Market Dominant category, and higher volume were the primary drivers of the additional revenue.”
Summarising the FY2017 performance, the PRC offered these bullet points:
- Market Dominant products average unit revenue decreased by 0.9 cents while average unit attributable cost increased by 1.0 cent.
- Competitive products attributable cost grew $1.4bn (11.2%), and contribution to institutional cost grew $0.8bn (13.3%). In FY 2017 Competitive products contributed $6.8bn (22.9%) to institutional costs.
- Competitive products’ share of total Postal Service revenue, attributable cost, and contribution to institutional cost has nearly tripled since FY 2007.
- Accumulated net deficit is $58.7bn, resulting from several years of net losses starting in FY 2007.
- Financial sustainability continues to erode due to large personnel related liabilities and the slow replacement of fully depreciated capital assets. Overall financial condition is adversely impacted by insufficient current assets (44% of total assets) to cover current liabilities (72% of total liabilities).
- The Postal Service’s FY 2017 working capital was negative $49.8bn.