November 21, 2016
Competitive Product Price Change Approval
Friday November 18, the Postal Regulatory Commission (PRC) issued a decision regarding the Competitive Products Price Changes case. In the PRC’s orders, it approved the USPS to proceed with implementation of the January 2017 Price Changes as proposed in October 2016 for: Competitive Products.
For a copy of the PRC’s complete ruling, it can be found at: http://www.prc.gov/docs/97/97886/Order%20No.%203622.pdf.
Share Mail Workshop-in-a-Box
Like referral marketing, Share Mail is a Single-Piece First-Class Mail product that allows a business to send/distribute an offer or promotional information to its customers that can be forwarded to other individuals through the mail. This workshop covers required program elements, examples, pricing and payment options, and information on enrollment for the Share Mail program.
Please share this information with your members using the attached PCC workshop-in-a-box presentation. If you have any questions about this presentation, please email PCC@usps.gov.
A PDF copy of the presentation with note pages is posted on RIBBS: CLICK HERE
A PowerPoint copy of the presentation and recorded webinar by the subject matter expert on Share Mail is posted on the PCC BlueShare site (Postal internal access only): CLICK HERE
The PCC workshop-in-a-box program gives PCCs the ability to provide educational information and material to their members.
November 15, 2016
U.S. Postal Service Reports Fiscal Year 2016 Results
WASHINGTON–After accounting for a $5.8 billion retiree health benefit prefunding obligation, the U.S. Postal Service posted a net loss of approximately $5.6 billion for fiscal year 2016 (October 1, 2015 -September30, 2016), as compared to a $5.1 billion net loss for the year ended September 30, 2015.Excluding this prefunding obligation, the Postal Service would have recorded net income of approximately $200 million in 2016.
“To drive growth in revenue and better serve our customers, we continue to invest in the future of the Postal Service by leveraging technology, improving processes and adjusting our network,” said Postmaster General and CEO Megan J. Brennan. “In 2016, we invested $1.4 billion, an increase of $206 million over 2015, to fund some of our much-needed building improvements, vehicles, equipment and other capital projects.”
The Shipping and Packages business continued its strong performance with revenue growth of $2.4 billion, or 15.8 percent. This was offset by a decline in First-Class Mail revenue of $925 million, or 3.3 percent, due largely to the exigent surcharge expiration and continuing electronic migration. These two trends, together with steady standard or advertising mail revenues, and a slight increase in other revenues account for the $1.6 billion growth in operating revenue.
“The Postal Service continues to win e-commerce customers and grow our package delivery business. We deliver more e-commerce packages to the home than any other shipper because of our predictable service, enhanced visibility and competitive pricing,” said Brennan.
Overall, the Postal Service reported operating revenue of $70.4 billion for 2016, excluding a $1.1 billion change in accounting estimate recorded during the year. This equates to an increase of $1.6 billion, or 2.3 percent, over last year (See Selected 2016 Results of Operations table below). Revenue growth was achieved despite the April 2016 expiration of the exigent surcharge mandated by the Postal Regulatory Commission. As a result of this expiration, revenue for 2016 was lower by approximately $1 billion than what it otherwise would have been. Going forward, without the surcharge, the Postal Service expects its revenue to decline from what it otherwise would be by almost $2 billion per year.
Despite the positive trends in some aspects of its business, the net loss suffered by the Postal Service this year cannot be ignored. Even with continued proactive and aggressive management, such losses are likely to persist for the foreseeable future because of mandated costs such as an unaffordable retiree health benefits program that is not fully integrated with Medicare, and an ineffective pricing system.
“This is why legislative and regulatory reforms remain critical for us to meet the needs of the American public now and well into the future,” said Brennan.
Operating expenses increased in 2016 compared to last year. In addition to a $922 million increase in workers’ compensation expense, compensation and benefits expenses increased by approximately $1.2 billion and transportation costs increased by$413 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 expense also increased to significantly improve service levels in 2016.
Controllable income for 2016 was $610 million compared to $1.2 billion for last year. In the day-to-day operation of its business, the Postal Service focuses on controllable income, which takes into account the impact of operational expenses including compensation and benefits; but does not reflect factors such as the legally-mandated expense to prefund retiree health benefits or the change in accounting estimate noted above (see Controllable Income below for a full description).
FY 2016 Revenue and Volume by Service Category Compared to Last Year
The following presents revenue and volume by category for the years ended September 30, 2016, and 2015:
|(revenue in $ millions; volume in millions of pieces)||2016||2015||2016||2015|
|Shipping and Packages||17,307||14,942||5,134||4,510|
|Total before change in accounting estimate||$||70,368||$||68,790||153,941||154,035|
|Change in accounting estimate||1,061||—||—||—|
|Total revenue and volume||$||71,429||$||68,790||153,941||154,035|
Selected FY 2016 Results of Operations and Change in Accounting Estimate
During the three months ended June 30, 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 three months ended June 30, 2016, and 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 liquidity or access to cash and does not affect its controllable income.
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 reconciles these non-GAAP operating revenue calculations with GAAP net loss for the years ended September 30, 2016, and 2015:
|(results in $ millions)||2016||2015|
|Operating revenue before temporary exigent surcharge||$||69,232||$||66,672|
|Temporary exigent surcharge*||1,136||2,118|
|Operating revenue after exigent surcharge before change in accounting estimate||$||70,368||$||68,790|
|Change in accounting estimate||1,061||—|
|Total operating revenue||$||71,429||$||68,790|
|Other interest (income) expense, net||190||162|
|* The temporary exigent surcharge expired on April 10, 2016.|
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 (loss) adjusted for items outside of management’s control and non-recurring items. These adjustments include the mandated prefunding of retirement health benefits, actuarial revaluation of retirement liabilities, non-cash workers’ compensation adjustments and the change in accounting estimate.
The following reconciles GAAP net loss to controllable income and illustrates the income from ongoing business activities without the impact of non-controllable and non-recurring items for the years ended September 30, 2016, and 2015:
|(in $ millions)||2016||2015|
|PSRHBF prefunding expense||5,800||5,700|
|Change in workers’ compensation liability due to fluctuations in discount rates||1,026||809|
|Other change in workers’ compensation liability1||188||(502||)|
|Actuarial revaluation of retirement liability2||248||241|
|Change in accounting estimate||(1,061||)||—|
|1 This is a net amount that includes changes in assumptions, as well as the valuation of new claims and revaluation of existing claims, less claim payments for the applicable periods.|
|2 Determined by OPM in 2015 to amortize the $3.6 billion unfunded FERS retirement obligation based on actuarial valuations and assumptions. The payments are to be made in equal installments over the next 30 years.|
Complete financial results are available in the Form 10-K, available at http://about.usps.com/who-we-are/financials/welcome.htm.