U.S. Postal Service Reports Fiscal Year 2017 Results


November 14, 2017 



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  • Volume for primary source of revenue - letter mail - declines by 5.0 billion pieces
  • Continued aggressive management actions along with postal reform legislation & regulatory changes critically needed to address declining volumes and changing mail mix

WASHINGTON — The U.S. Postal Service reported revenue of $69.6 billion for fiscal year 2017 (October 1, 2016 - September 30, 2017), a decrease of $1.8 billion compared to the prior year. The lower revenues were driven largely by accelerated declines in First-Class and Marketing Mail volumes.

In 2017, mail volumes declined by approximately 5.0 billion pieces, or 3.6 percent, while package volumes grew by 589 million pieces, or 11.4 percent, continuing a multi-year trend of declining mail volumes and increasing package volume. While mail volume declines for the year were somewhat offset by growth in package volume, overall volume has declined by 4.9 billion pieces.

The growth in our Shipping and Packages business provided some help to the financial picture of the Postal Service as revenue increased $2.1 billion, or 11.8 percent. However, that growth was offset in our financials by the decline in mail volumes discussed above, as well as a $1.1 billion 2016 noncash change in accounting estimate and the 2016 roll-back of the exigent surcharge mandated by the Postal Regulatory Commission which further reduced revenue by $1.1 billion from what it otherwise would have been.

"Our financial situation is serious, though solvable,” said Postmaster General and CEO Megan J. Brennan. “There is a path to profitability and long-term financial stability. We are taking actions to control costs and compete effectively for revenues in addition to legislative and regulatory reform. We continue to optimize our network, enhance our products and services, and invest to better serve the American public."

Brennan stressed that the path forward for a financially stable future must also include urgent actions needed outside of the Postal Service's control. They include advancement and passage of the postal reform provisions contained in H.R. 756 in the 115th Congress and the adoption by the Postal Regulatory Commission of a new pricing system as part of its 10-year pricing review, enabling the Postal Service to generate sufficient revenues to cover our costs.

Operating expenses for the year were $72.2 billion, a decrease of $4.7 billion, or 6.1 percent, compared to the prior year, although this net reduction was largely attributable to changes in actuarially determined expenses outside of management's control.  Expenses for retiree health benefits and workers compensation declined by $4.8 billion and $3.5 billion, respectively, but were partially offset by $2.4 billion in higher expenses for the amortization of unfunded retirement benefits, the result of statutory mandates effective for 2017 and changes in Office of Personnel Management actuarial assumptions. Expenses for compensation and benefits and transportation also added $667 million and $246 million, respectively, to 2017 operating expenses.

The Postal Service reported a net loss for the year of $2.7 billion, a decrease in net loss of $2.8 billion compared to 2016. Of this decline in net loss, $2.4 billion was the result of changes in interest rates, outside of management's control, that reduced workers’ compensation expense compared to last year.

The controllable loss for the year was $814 million, a change of $1.4 billion, driven by the $775 million decline in operating revenue before the 2016 change in accounting estimate, along with the increases in compensation and benefits and transportation expenses of $667 million and $246 million, respectively.

Similar to the last several years, the Postal Service was unable to make any of the payments that were due to the federal government at the end of the fiscal year, which amounted to approximately $6.9 billion in 2017, to pre-fund pension and health benefits for postal retirees.

“Making the payments to the federal government in full or in part would have left the Postal Service with insufficient liquidity to ensure that we will be able to cover our current and anticipated operating costs, make necessary capital investments, and absorb any contingencies or changes in the marketplace," said Chief Financial Officer and Executive Vice President Joseph Corbett. "We will continue to prioritize the maintenance of adequate liquidity to ensure the Postal Service is able to perform our primary mission of providing universal service to all Americans."

FY 2017 Operating Revenue and Volume by Service Category Compared to Prior Year
The following presents revenue and volume by service category for the year ended September 30, 2017, and 2016:

   

Revenue

 

Volume

 
 

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

2017

 

2016

 

2017

 

2016

 
                   
 

Service Category

               
 

First-Class Mail

$

25,637

   

$

27,508

   

58,747

   

61,240

   
 

Marketing Mail

16,626

   

17,622

   

78,329

   

80,885

   
 

Shipping and Packages

19,481

   

17,427

   

5,748

   

5,159

   
 

International

2,723

   

2,674

   

1,003

   

1,005

   
 

Periodicals

1,375

   

1,507

   

5,301

   

5,586

   
 

Other

3,751

   

3,630

   

363

   

467

   
 

Total before change in accounting estimate

$

69,593

   

$

70,368

   

149,491

   

154,342

   
 

Change in accounting estimate

$

   

$

1,061

   

   

   
 

Total operating revenue and volume

$

69,593

   

$

71,429

   

149,491

   

154,342

   

 


2016 Change in Accounting Estimate
During the third quarter of fiscal year 2016, the Postal Service revised the estimation technique utilized to determine its Deferred revenue-prepaid postage liability for a series of postage stamps. The change resulted from new information regarding customers’ retention and usage habits of Forever Stamps, and enabled the Postal Service to update its estimate of usage and “breakage” (representing stamps that will never be used for mailing due to loss, damage or stamp collection).

As a result of this change in estimate, the Postal Service recorded a decrease in its Deferred revenue-prepaid postage liability as of June 30, 2016, which caused an increase in revenue and decrease in net loss of $1.1 billion for the year ended September 30, 2016. This change in accounting estimate resulted in a non-cash adjustment that does not impact the Postal Service's available cash or access to cash and does not affect its controllable loss.

Selected FY 2017 Results of Operations
This news release references operating revenue before the change in accounting estimate and operating revenue before the temporary exigent surcharge, which are 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 loss for the year ended September 30, 2017, and 2016:

 

(results in $ millions)

2017

 

2016

 
  Operating revenue        
 

Operating revenue before temporary exigent surcharge and change in accounting estimate

$

69,593

   

$

69,232

   
 

Temporary exigent surcharge1

   

1,136

   
 

Operating revenue before change in accounting estimate

$

69,593

   

$

70,368

   
 

Change in accounting estimate2

   

1,061

   
 

Total operating revenue

$

69,593

   

$

71,429

   
 

Other revenue

43

   

69

   
 

Total revenue

$

69,636

   

$

71,498

   
 

Total operating expenses

$

72,210

   

$

76,899

   
 

Interest and investment income (expense), net

(168)

   

(190)

   
 

Total expenses

$

72,378

   

$

77,089

   
 

Net loss

$

(2,742

)

 

$

(5,591

)

 
 

1 The temporary exigent surcharge expired on April 10, 2016.

2 This change in accounting estimate relates solely to changes in estimates of stamp usage and breakage for Forever Stamps sold from 2011 through June 30, 2016, reflected as a decrease in the Deferred revenue-prepaid postage liability as of June 30, 2016.

 

Controllable (Loss) Income
This news release references controllable (loss) income, which is not calculated and presented in accordance with GAAP. Controllable income (loss) is a non-GAAP financial measure defined as net income (loss) 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, PSRHBF prefunding expenses, the amortization of PSRHBF, CSRS and FERS unfunded liabilities, and the change in accounting estimate.

The following table reconciles the Postal Service's GAAP net loss to controllable (loss) income and illustrates the loss from ongoing business activities without the impact of non-controllable and non-recurring items for the years ended September 30, 2017, and 2016:

 

(in $ millions)

2017

 

2016

 
           
 

Net loss

$

(2,742

)

 

$

(5,591

)

 
           
 

PSRHBF supplemental unfunded liability expense1

955

   

   
 

PSRHBF prefunding fixed amount2

   

5,800

   
 

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

(1,362)

   

1,026

   
 

Other change in workers’ compensation liability3

(850)

   

188

   
 

Change in accounting estimate4

   

(1,061)

   
 

CSRS supplemental unfunded liability expense5

1,741

   

   
 

FERS supplemental unfunded liability expense6

917

   

248

   
 

Change in normal cost of retiree health benefits due to revised actuarial assumptions7


527

   

   
           
 

Controllable (loss) income

$

(814)

   

$

610

   
           
 

1 Expense for the annual payment due by September 30, 2017, on the unfunded liability as calculated by OPM.

 
 

2 Expense for the annual prefunding payments to the PSRHBF due on September 30, 2016, and 2015, upon which the Postal Service defaulted.

 
 

3 Net amounts include changes in assumptions, as well as the valuation of new claims and revaluation of existing claims, less current year claim payments.

 
 

4 This change in accounting estimate relates solely to changes in estimates of stamp usage and breakage for Forever Stamps sold from 2011 through June 30, 2016, reflected as a decrease in the Deferred revenue-prepaid postage liability as of June 30, 2016.

 
 

5 Expense for the annual payment due September 30, 2017, calculated by OPM, to amortize the unfunded CSRS retirement obligation as of September 30, 2016, the date of the most recent available information. Payments are to be made in equal installments through 2043.

 
 

6 Expense for the annual payment due September 30, 2017, calculated by OPM, to amortize the unfunded FERS retirement obligation as of September 30, 2016, the date of the most recent available information. Payments are to be made in equal installments through 2046.

 
 

7 Represents the annual portion of the normal cost payment due September 30, 2017, attributable to revised actuarial assumptions and discount rate changes. The total normal cost payment amount, calculated by OPM, is $3.3 billion.

 

 

Complete financial results are available in the Form 10-K, available (after 9 am ET) 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 10:00 am ET on November 14, 2017, and is open to news media and all other interested parties.

How to Participate:
US/Canada Attendee Dial-in: 844-340-4622                Conference ID: 2597149

Attendee Direct URL: https://usps.webex.com/usps/onstage/g.php?MTID=e155a3970e3c030d38ac7aa046745d576

If you cannot join using the direct link above, please use the alternate logins below:
Alternate URL: https://usps.webex.com
Event Number: 993 038 707

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.

# # #

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For reporters interested in speaking with a regional Postal Service public relations professional, please go to about.usps.com/news/media-contacts/usps-local-media-contacts.pdf.

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