Postal Service Loses $2.1 Billion in Q2, Fails to Grow Revenue in Boom Economy
The U.S. Postal Service (USPS) continues to lose money despite a booming economy under the Trump administration.
USPS reported total revenue of $17.5 billion for the second quarter of fiscal 2019 (January 1, 2019 – March 31, 2019), a decrease of $8 million compared to the same quarter last year.
The postal service is working to replace lost first class mail revenue with increased parcel traffic. While it keeps the agency operating, it also places it in steeper competition with much more efficient companies like UPS and FedEx. Due to massive subsidies from the federal government, USPS can give discounts to Amazon that the others cannot – and taxpayers foot the bill.
First-Class Mail revenue declined by $217 million, or 3.3 percent, on a volume decline of 576 million pieces, or 3.9 percent, compared to the same quarter last year. Marketing Mail revenue declined by $155 million, or 3.9 percent, on a volume decline of 959 million pieces, or 5.2 percent, compared to the same quarter last year. Meanwhile, Shipping and Packages revenue increased by $253 million, or 4.9 percent, on volume growth of 5 million pieces, or 0.3 percent, compared to the same quarter last year.
Total operating expenses were $19.6 billion for the quarter, an increase of $751 million, or 4.0 percent, compared to the same quarter last year. Excluding costs impacted by actuarial revaluation, discount rate changes, and amortization of unfunded liabilities, which are outside of management’s control, expenses increased by $154 million, or 0.8 percent, compared to the same quarter last year.
“The Postal Service continues to pursue aggressive management actions and to seek legislative and regulatory reforms to address our overall cost structure and enhance revenue-generating opportunities,” said Postmaster General and CEO Megan J. Brennan. “Our focus remains on meeting the expectations of the American public, continuing to invest in the future of the organization, and continually delivering innovations and increased value for both the senders and receivers of mail and packages.”
The net loss for the quarter totaled nearly $2.1 billion, an increase of $747 million, compared to a net loss of $1.3 billionfor the same quarter last year, however, the controllable loss for the quarter was $806 million, compared to a controllable loss of $656 million for the same quarter last year.
“We continue to face challenges from the ongoing migration of mail to electronic alternatives, and we are legally limited under current law in how we can price our products and streamline our legacy costs,” said Chief Financial Officer and Executive Vice President Joseph Corbett. “Within the framework of our current business model, we are executing to grow revenue and reduce operating expenses.”
The Postal Service is an independent agency under the executive branch of the Federal Government. Its existence is enshrined in The Constitution and while it receives no tax dollars, it does receive billions of dollars worth of direct and indirect government subsidization.
Second Quarter Fiscal 2019 Operating Revenue and Volume by Service Category Compared to Prior Year
The following table presents revenue and volume by category for the three months ended March 31, 2019, and 2018:
|(revenue in $ millions; volume in millions of pieces)||2019||2018||2019||2018|
|Shipping and Packages||5,441||5,188||1,470||1,465|
|Total operating revenue and volume||$||17,492||$||17,496||34,757||36,348|
Selected Second Quarter Fiscal 2019 Results of Operations and Controllable Loss
This news release references controllable loss, which is not calculated and presented in accordance with accounting principles generally accepted in the United States (GAAP). Controllable loss is defined as net 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, and the amortization of Postal Service Retiree Health Benefits Fund (PSRHBF), Civil Service Retirement System (CSRS) and Federal Employee Retirement System (FERS) unfunded liabilities.
The following table presents selected results of operations and reconciles GAAP net loss to controllable loss and illustrates the loss from ongoing business activities without the impact of non-controllable items for the three months ended March 31, 2019, and 2018:
|(results in $ millions)||2019||2018|
|Total operating expenses||$||19,557||$||18,806|
|Interest and investment income (expense), net||(20)||(32)|
|PSRHBF unfunded liability amortization expense1||275||297|
|Change in workers’ compensation liability resulting from fluctuations in discount rates||454||(557)|
|Other change in workers’ compensation liability2||(53)||(58)|
|CSRS unfunded liability amortization expense3||360||479|
|FERS unfunded liability amortization expense4||240||415|
|Change in normal cost of retiree health benefits due to revised actuarial assumptions5||—||103|
|1 Expense for the accrual for the annual payment due to PSRHBF by September 30 of the respective fiscal year, for the amortization of the unfunded liability based on Postal Service estimates to OPM’s preliminary calculations with updated discount rate assumptions.|
|2 Net amounts include changes in assumptions, 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 through 2043 based on OPM invoices.|
|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 through 2047 based on OPM invoices.|
|5 Represents the accrual for the portion or the increase in the annual normal cost payments due September 30, 2018, attributable to revised actuarial assumptions and discount rate changes, based on OPM’s invoices for the year. This amount represents the non-controllable portion of the expense recorded for normal cost of retiree health benefits.|