The Postal Regulatory Commission’s (PRC) review of the United States Postal Service’s (USPS) performance in 2016 indicates that “financial concerns persist despite improvements in liquidity – and USPS’s “significant liabilities” are impacting its cash position.
USPS generated an operating income of $610m in financial year (FY) 2016, despite an increase in operating expenses and the expiration of the exigent surcharge in April.
The PRC report suggests that, when put in context, this is not such a positive result.
In a statement sent to Post&Parcel on Friday (31 March), the PRC said: “While this is the third consecutive year of net positive Operating Income, it is $578m less than the net operating income of $1.2bn recorded in FY 2015.
“Revenues from Market Dominant and Competitive products rate increases, the exigent price surcharge on Market Dominant products during the earlier half of the fiscal year, and continuing growth in Competitive products volume contributed to the net Operating Income.
“However, when all adjustments are included, the Postal Service incurred a net loss of $5.6bn, a $531m deterioration from FY 2015.
“The increase in the total net loss is largely driven by a $1.5bn increase in overall compensation and benefits costs and an increase in non-cash workers’ compensation expense of $906 million caused by a decrease in the discount rate.”
A major problem hanging over USPS is, of course, is the liabilities that it has to bear – or has been saddled with, depending on your point of view.
According to the PRC: “At the end of FY 2016, net liabilities primarily consist of Retiree Health Benefits Fund (RHBF) accruals, workers’ compensation liability, and the total net debt owed the Federal Financing Bank. Current liabilities, consisting largely of Retiree Health Benefits Fund (RHBF) obligations and short-term borrowing, contributed to a large portion (67.3%) of the $81.2bn in total liabilities. The Postal Service has not yet paid the RHBF statutory requirement for FY 2011 through FY 2016, which accounts for $33.9bn of current liabilities.
“Additionally, at the end of FY 2016, the Postal Service recorded a $55.9bn net deficiency from several years of net losses starting in FY 2007. Although FY 2016, FY 2015 and FY 2014 had net operating income, the slow replacement of fully depreciated capital assets and high personnel related liabilities led to continued erosion of financial sustainability.”
Return to the USPS’s financial outlook, the PRC said: “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 (38% of total assets) to cover current liabilities (67% of total liabilities).”
A complete copy of the Commission’s Financial Analysis report may be found at www.prc.gov.
Source: The Postal Regulatory Commission (PRC)