FINANCIAL ANALYSIS

of United States Postal Service 

Financial Results and 10-K Statement

Fiscal Year 2017

April 5, 2018

Postal Regulatory Commission

Submitted 4/5/2018 2:18:55 PM

Filing ID: 104498

Accepted 4/5/2018
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Chapter I | Report Overview ................................... 3

Financial Changes................................................... 3

Chapter II | Postal Service Financial Status.............. 7

Introduction.................................................................. 7

Analysis of Income Statements .................................... 9

Market Dominant Revenue Compared 

 to Prior Year ....................................................... 12

Competitive Product Revenue Compared 

 to Prior Year ....................................................... 15

Expense Analysis as Compared to Prior Year....... 16

Personnel Expenses as Share of Total Expenses .. 16

Personnel Expenses ............................................. 17

Non-Personnel Expenses ..................................... 23

Total Factor Productivity ...................................... 24

Comparison of Postal Service Actual to

 Operating Plan.......................................................... 25 

Analysis of Balance Sheets ......................................... 28

Assets................................................................... 30

Liabilities.............................................................. 31

Analysis of Statements of Cash Flows ........................ 32

Chapter III | Volume, Revenue, and Cost Trends.... 35

Overview .................................................................... 35

Overall Volume, Revenue, and Cost Trends................ 36

Attributable and Institutional Cost 

 Relationships...................................................... 36 

Market Dominant Products and Services............. 38

Market Dominant Volume Trends........................ 39

Market Dominant Revenue and Cost Trends ....... 40

Competitive Products and Services...................... 41 

Market Dominant Volume, Revenue, and Cost Trends 

 by Class..................................................................... 43

First-Class Mail ..................................................... 43

First-Class Mail Letters Compared with FY 2016 ..... 43

Trends in First-Class Mail Letters....................... 44

First-Class Mail Flats Compared with FY 2016 .. 47

Trends in First-Class Mail Flats.......................... 48

Other First-Class Mail Compared with FY 2016 ..... 50

Marketing Mail ......................................................... 51

Marketing Mail Letters Compared with FY 2016.. 51

Trends in Marketing Mail Letters ......................... 53

Marketing Mail Flats Compared with FY 2016..... 53

Trends in Marketing Mail Flats............................. 54

Periodicals................................................................. 57

Periodicals Compared with FY 2016..................... 57

Trends in Periodicals............................................ 58

Package Services....................................................... 60

Market Dominant Special Services........................... 62

Competitive Volume, Revenue, and Cost by Product ...63

Trends in Competitive Products........................... 65

Chapter IV | Sustainability, Liquidity,

Activity, and Financial Solvency............................. 69

Introduction................................................................ 69

Financial Sustainability Analysis................................. 71

Debt Ratio............................................................ 71

Fixed Asset to Net Worth Ratio............................ 72

Current Liability Ratio .......................................... 72

Financial Liquidity Analysis......................................... 73

 Current Ratio........................................................ 74

Quick Ratio........................................................... 74

Cash Ratio ............................................................ 74

Working Capital Analysis...................................... 74

Financial Activity Analysis........................................... 75

Trend Analysis...................................................... 75

Financial Solvency Analysis......................................... 78

Altman Z-Score..................................................... 78

Deconstructing the Altman Z-Score

 Working Capital to Total Assets........................ 80

Retained Earnings to Total Assets........................ 80

Earnings to Total Assets ....................................... 82

Capital to Total Liabilities..................................... 83

Shift in Altman Z-Score......................................... 84

Appendix A. Fiscal Year 2017 Volume, Revenue, ........... 

 Incremental Cost and Cost Coverage by Class Current 

 Classification (Products) ........................................... 85

Appendix B. Fiscal Year 2017 Volume, Revenue, 

 Attributable Cost and Cost Coverage by Class Current 

 Classification (Products) (USPS CRA Report) ............ 86

1

TABLE OF CONTENTS

COVER PHOTO BY WRANGLER/SHUTTERSTOCK.COM
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CHAPTER I | 3

Financial Changes

In FY 2017, the Postal Service recorded its first net loss from operations1 since 

FY 2013. The net loss from operations is largely due to the expiration of the exigent 

surcharge, declining Market Dominant volume, and higher operating expenses. The 

$1.3 billion net loss from operations is nearly $2.0 billion less than the FY 2016 $0.6 

billion net income from operations. However, when the Non-operating Expenses 

(NOEs) are included,2 the FY 2017 total net loss is $2.7 billion—an improvement of 

$2.8 billion compared to FY 2016. 

PHOTOS BY ORHAN CAM

CHAPTER I 

Report Overview

1 Net income or loss from operations is also referred to as net operating income (loss).

2 NOEs include all non-cash workers’ compensation costs, accruals to retirement accounts, and one-time adjustments.

PHOTO BY USPS
4 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

This improvement results from a $4.8 billion 

decrease in the retiree health benefits (RHB) 

expense and a $3.4 billion decrease in the 

workers’ compensation expense, offset by $2.4 

billion in increased expenses that resulted from 

Postal Accountability and Enhancement Act 

(PAEA) provisions for unfunded retirement 

benefit costs.3

Figure I-1 shows net income (loss) and net 

operating income (loss) results for the last 

ten years.

3 United States Postal Service, 2017 Report on Form 10-K, November 14, 2017, at 16 (Postal Service FY 2017 Form 10-K).

Figure I-1

Postal Service Income/(Loss), FY 2007 – FY 2017

($ in Millions)

Net Income (Loss)

Net Operating Income (Loss)

Source: Postal Service Form 10-K and USPS Annual Report, FY 2007-FY 2017.

(20,000)

(15,000)

(10,000)

(5,000)

0

5,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Net Income (Loss) ($ in Millions)

Fiscal Year

Net Income (Loss) with NOE Net Income (Loss) without NOE
CHAPTER I | 5

The Postal Service’s liquidity continued to 

improve in FY 2017. Figure I-2 illustrates the 

overall liquidity, along with cash and debt 

trends, since FY 2007. The Postal Service

reached its statutory debt limit of $15 billion 

at the end of FY 2012.4

The recent improvements in its cash balance 

have allowed the Postal Service to increase 

its capital investment plans. The FY 2017 

Integrated Financial Plan (IFP) included a 

capital investment budget of $1.9 billion for 

facilities, mail processing equipment, vehicles, 

and information technology.5

Figure I-2

Postal Service Liquidity, FY 2007 – FY 2017

 ($ in Millions)

Source: Postal Service Form 10-K and USPS Annual Report, FY 2007-FY 2017.

Cash

Available Debt

Total Liquidity (Cash + Avail. Debt)

4 Id. at 10. 5

 United States Postal Service, 2017 Integrated Financial Plan, December 2, 2016, at 7 (FY 2017 IFP).

 -

 2,000

 4,000

 6,000

 8,000

 10,000

 12,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

$ in Millions

Cash Available Debt Total Liquidity (Cash + Avail. Debt)

(20,000)

(15,000)

(10,000)

(5,000)

0

5,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Net Income (Loss) ($ in Millions)

Fiscal Year

Net Income (Loss) with NOE Net Income (Loss) without NOE
6 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

Significant highlights of FY 2017 include:

• Consumer price index (CPI)-based price 

increases were not enough to offset revenue 

lost from declining volumes and the 

expiration of the exigent surcharge.

• Total Market Dominant revenue decreased 

7.7 percent compared to FY 2016.

• 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 11.2 percent and contribution to 

institutional cost grew 13.3 percent.

• Competitive products share of total Postal 

Service revenue, attributable cost, and 

contribution to institutional cost has nearly 

tripled since FY 2007.

• Total Factor Productivity (TFP) declined 

slightly for the second year in a row.

• Accumulated net deficit is $58.7 billion, 

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 percent of total assets) 

to cover current liabilities (72 percent of 

total liabilities).

• The Retiree Health Benefits expense 

decreased by $4.8 billion due to the 

expiration of the PAEA mandated statutory 

obligation, but this was partly offset by 

increases in unfunded retirement benefit 

costs of $2.4 billion.

• The Postal Service’s FY 2017 working 

capital was negative $49.8 billion.

• The Postal Service cash position is at the 

highest level since FY 2007; however, 

significant balance sheet liabilities and offbalance sheet unfunded liabilities for pension 

and annuitant health benefits threaten the 

improvements in liquidity.
CHAPTER II | 7

Introduction

This chapter analyzes the Postal Service’s overall financial status, with a focus 

on key figures in financial statements. The Commission evaluates relationships 

between the essential components of the Postal Service’s financial statements

in order to better understand the Postal Service’s profitability, stability, and 

long-term viability.

PHOTOS BY ORHAN CAM

CHAPTER II

Postal Service Financial Status

PHOTO BY USPS
8 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

The Commission’s analysis is primarily based 

upon the Postal Service’s Form 10-K financial 

statements for FY 2017 and FY 2016. To provide 

a basis for comparison, the Commission also 

incorporates select key financial data from the 

past ten years.

The Postal Service’s Form 10-K report

consists of:

• Income Statements, which measure the 

Postal Service’s financial performance 

(profit and loss) over the fiscal year

• Balance Sheets, which summarize the 

Postal Service’s assets and liabilities held

 at the end of the fiscal year

• Statements of Changes in Net Deficiency, 

which combine the accumulated net 

deficit from operations and initial 

capital contributions

• Statements of Cash Flows, which measure

the Postal Service’s inflows and outflows 

of cash during the fiscal year

This chapter is divided into the following sections:

Analysis of Income Statements. This section 

reviews overall income and loss, and compares 

current revenue and expenses with those 

forecasted for the current year and reported 

during the prior fiscal year. This section includes 

a summary of specific retirement funding 

changes for FY 2017. It also compares changes in 

Postal Service productivity between FY 2016 and 

FY 2017.

Analysis of Balance Sheets. The Balance Sheet 

section begins with a summary of the Postal 

Service’s assets and liabilities at the end of 

the fiscal year. The remainder of the section 

discusses changes in net deficiency, which occurs 

because Postal Service liabilities exceed assets.

Analysis of Statements of Cash Flows. This section 

analyzes the Postal Service’s inflows and 

outflows of cash and debt during the year.
CHAPTER II | 9

Analysis of Income Statements

To facilitate a detailed financial analysis of the 

Postal Service’s Income Statements, the Commission 

separately identifies elements of reported operating 

revenue and operating expenses.

Net operating revenue includes mail and services 

revenue as well as government appropriations 

revenue. In FY 2016, the Postal Service made 

a $1.0 billion adjustment to total Market 

Dominant products revenue.1 For purposes of 

this comparative analysis, the adjustment is 

shown separately in Table II-1 as “Adjustment for 

postage related to Forever Stamps.”

Table II-1 illustrates the Commission’s 

disaggregated version of the Income Statements.

Table II-1

Postal Service Income Statements Restated to Facilitate Analysis, FY 2017 and FY 2016

($ in Millions)

1

 Estimated revenue recognized for postage sold but not used (deferred revenue) was increased to record omitted revenue from a recalculation of Forever 

Stamps usage included in Postage in the Hands of the Public (PIHOP) during the past years.

Decrease in revenue and expense is denoted by (). Increase in net loss is denoted by (). Numbers may not add across due to rounding.

Source: Docket No. ACR2017, Library Reference USPS-FY17-5, December 29, 2017; Docket No. ACR2016, Library Reference USPS-FY16-5, 

December 29, 2016 ; FY 2017 Plan data from USPS Preliminary Financial Information (Unaudited), September 2017, November 14, 2017 

(November 14, 2017, Preliminary Financial Information); file “2017.11.14 September FY 2017 Report to the PRC--Report.pdf.”

FY 2017 FY 2016 Variance FY 2017 

Plan

Variance 

from Plan

Total Revenue as Reported by the Postal Service $69,636 $71,498 $(1,862) $70,665 $(1,029)

Less: Adjustment for Postage Related to Forever Stamps - (1,061) 1,061 - - 

Net Operating Revenue $69,636 $70,437 $(801) $70,665 $(1,029)

Operating Expense as Reported by the Postal Service 72,210 76,899 (4,689) 74,725 (2,515)

Less: Amortization of Unfunded RHB FY 2017; 

 Statutory Accrual FY 2016

 (955) (5,800) 4,845 (2,840) 1,885 

 Amortization of CSRS Unfunded Liability (1,741) - (1,741) (1,232) (509)

 Amortization of FERS Unfunded Liability (917) (248) (669) (248) (669)

 Non-Cash Change to Workers' Compensation Liability 2,212 (1,214) 3,426 - 2,212 

Net Operating Expense $70,809 $69,637 $1,172 $70,405 $404 

Interest Income 58 32 26 48 10 

Interest Expense 226 222 4 237 (11)

Net Income (Loss) from Operations $(1,341) $610 $(1,951) $71 $(1,412)

Adjustment for Postage Related to Forever Stamps - 1,061 (1,061) - - 

Amortization of Unfunded RHB FY 2017; 

Statutory Accrual FY 2016

 955 5,800 (4,845) 2,840 (1,885)

Amortization of CSRS Unfunded Liability 1,741 - 1,741 1,232 509 

Amortization of FERS Unfunded Liability 917 248 669 248 669 

Non-Cash Change to Workers' Compensation Liability (2,212) 1,214 (3,426) - (2,212)

Net Loss $(2,742) $(5,591) $2,849 $(4,249) $1,507 
10 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

The Postal Service incurred a net operating 

loss of $1.3 billion in FY 2017. In FY 2016, the 

Postal Service had a net operating income of $0.6 

billion so the FY 2017 loss represents a nearly 

$2 billion decline.2 The net loss is largely due to 

the expiration of the exigent surcharge, declining 

Market Dominant volume, and higher operating 

expenses. Net operating expense was $1.2 billion 

higher than in FY 2016, primarily driven by 

increases in compensation and benefits costs.

After all adjustments are included, the net 

operating loss of $1.3 billion becomes a total net 

loss of $2.7 billion. This is an improvement of

$2.8 billion compared to FY 2016. The 

improvement in the total net loss is largely driven 

by lower overall retirement expenses3 and a $3.4 

billion decrease in the workers’ compensation 

expense resulting from a higher discount rate.

The Postal Service’s funding requirements for 

retirement benefits changed significantly in FY 

2017 in five material aspects. These changes are 

shown in Table II-2. As stated above, although 

the retirement expenses are disaggregated by 

the Commission as accrual entries, they are 

discussed in this section because they have an 

impact on total net income (loss).

2 The Commission’s calculation of net operating income (loss) differs from the controllable net income (loss) reported in Postal Service Form 10-K by $527 

million. The Postal Service excludes the difference in the normal cost of Retiree Health Benefits ($527 million) from its controllable income because it is the 

result of actuarial changes. Postal Service FY 2017 Form 10-K at 17.

3 Retirement-related benefits costs are lower than the prior year because of changes in retirement funding requirements. See Table II-2.

4 See August 10, 2017 Notice of Supplemental Information at 2.

5 See 5 U.S.C. § 8423(b)(2).

FY 2017 FY 2016 $Variance

Annual Amortization of CSRS Unfunded Liability $1,741 $- $1,741 

Annual Amortization of FERS Unfunded Liability 917 248 669 

RHBF Statutory Prefunding Amount - 5,800 (5,800)

Amortization of RHBF Unfunded Liability 955 - 955 

Normal Costs of Retiree Health Benefits 3,305 - 3,305 

Retiree Health Benefit Premiums - 3,305 (3,305)

Total Retirement Expense $6,918 $9,353 $(2,435)

Table II-2

Postal Service Changes in Retirement Funding Requirements, FY 2017 – FY 2016

($ in Millions)

First, the PAEA suspended the Postal Service’s 

contributions to the Civil Service Retirement 

System (CSRS) until after FY 2016. In June 2017, 

OPM revalued the FY 2016 CSRS unfunded 

liability at $26.9 billion and assessed an annual 

amortization payment of $1.7 billion, due 

September 30, 2017, to liquidate the unfunded 

obligation by FY 2043.4

Second, OPM determined the FY 2016 

supplemental liability for Federal Employees 

Retirement System (FERS) to be $10.9 billion, 

excluding unpaid prior-year balances of $4.4 

billion, and assessed an annual amortization 

payment of $917 million due September 30, 

2017, to liquidate the unfunded obligation by 

FY 2046.5 

Source: Postal Service FY 2017 Form 10-K at 17; Docket No. RM2017-3, Notice of Supplemental 

Information, August 10, 2017 (August 10, 2017 Notice of Supplemental Information).
CHAPTER II | 11

The FY 2017 amortization payment of

$917 million was $669 million more than 

the prior year due to actuarial assumptions 

revised on June 1, 2017, and used in calculating 

the obligation.6

Third, the PAEA established the Retiree Health 

Benefit Fund (RHBF) to fund the long-term 

retiree health benefits for postal employees, 

retirees, and their survivors. From FY 2007 

through FY 2016, the PAEA required the Postal 

Service to make specified annual payments into 

the RHBF. By law, the fixed annual payments 

were replaced in FY 2017 with an amortization 

of the unfunded obligation. As shown in Table II2, the mandated prefunding fixed payments into 

the RHBF ceased in FY 2017. OPM revalued the 

FY 2016 RHB unfunded liability at $56.9 billion7 

and assessed an annual amortization payment of 

$955 million due September 30, 2017, to liquidate 

the unfunded obligation by FY 2056.8

Fourth, the change in the funding mechanism 

for Postal Service retiree health benefits in FY 

2017 no longer requires the Postal Service to pay 

its annual government share of retiree health 

benefit premiums. Beginning in FY 2017, the 

Postal Service funds normal costs determined 

annually by OPM. “Normal costs” are the present 

value of the estimated retiree health benefits 

based on active employees’ current year of 

service.9 OPM assessed a FY 2016 normal cost of 

$3.3 billion payable by September 30, 2017.

Fifth, starting in FY 2017, the Postal Service’s 

share of annual retiree health benefit premiums 

are paid from the RHBF. As shown above in 

Table II-2, the Postal Service’s contribution

for retiree health benefit premiums dropped 

to zero in FY 2017.

The Postal Service defaulted on its FY 2017 

payment of Retiree Health Benefit (RHB) normal 

costs and the amortization of its retirementrelated unfunded obligations. On November 

13, 2017, the Postal Service filed a request 

with the Commission under section 802(c) of 

the PAEA.10 In its request, the Postal Service 

asks the Commission to examine the actuarial 

appropriateness and accuracy of OPM using 

government‐wide demographic and salar

growth assumptions rather than those specific to 

Postal Service CSRS employees and annuitants. 

On January 30, 2018, the Postal Service filed a 

request under 5 U.S.C. § 8909a(d)(5)(A).11 In its 

request, the Postal Service asks the Commission 

to examine the actuarial appropriateness 

and accuracy of OPM using government‐wide

assumptions rather than those specific to 

Postal Service employees and annuitants in the 

determination of the RHB obligation. It also 

observes that the propriety of full use of postal

specific assumptions has been recognized by the 

Postal Service’s Office of Inspector General.

6 See Docket No. RM2017-3, Notice of Supplemental Information, October 3, 2017, at 1.

7 RHB unfunded liability as of September 30, 2016, calculated as “Accrued Liability” $108.8 billion less “Value of invested PSRHBF Assets” $51.9 billion.

 August 10, 2017 Notice of Supplemental Information, Attachment at 1.

8 See id.

9

 Postal Service FY 2017 Form 10-K at 5.

10 Docket No. SS2018-1, Request of the United States Postal Service for Review of the Office of Personnel Management’s Determination Regarding Civil 

Service Retirement System Liability, November 13, 2017.

11 Docket No. SS2018-2, Request of the United States Postal Service for the Commission to Conduct a Review of the Office of Personnel Management’s 

Determination Regarding Retiree Health Benefits Liability, January 30, 2018.
12 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

MARKET DOMINANT REVENUE 

COMPARED TO PRIOR YEAR

The discussion in this section summarizes the 

overall revenue by class for Market Dominant 

products. Chapter 3 presents a more detailed 

discussion of revenue by class and product.

Table II-3 shows FY 2017 and FY 2016 revenue 

by class.

Total Adjusted Market Dominant Mail and 

Services Revenue declined 7.7 percent from the 

prior year.12 First-Class Mail revenue declined by 

6.7 percent, and Marketing Mail revenue declined 

by 5.7 percent. Periodicals revenue declined by 

8.8 percent. The only Market Dominant product 

with increased revenue was Package Services, 

which increased by 0.3 percent compared to FY 

2016. Two factors are principally responsible for 

these declines: (1) consumer price index (CPI)-

based price increases were not enough to offset 

revenue lost from declining volumes, and (2) 

FY 2017 was the first full fiscal year after the 

expiration of the exigent surcharge.13

FY 2017 FY 2016 $ Variance % Variance

First-Class Mail $27,122 $29,059 $(1,937) (6.7%)

Marketing Mail 16,672 17,675 (1,003) (5.7%)

Periodicals 1,375 1,507 (132) (8.8%)

Package Services 801 799 2 0.3%

Ancillary and Special Services 1,792 1,828 (36) (2.0%)

Subtotal Market Dominant Mail and Services Revenue $47,761 $50,868 $(3,107) (6.1%)

Other 1,110 994 116 11.7%

Change in Estimate of Prepaid Postage - 1,061 (1,061) (100.0%)

Total Adjusted Market Dominant Mail and Services Revenue $48,871 $52,923 $(4,052) (7.7%)

Table II-3

Revenue by Market Dominant Class, FY 2017 and FY 2016

($ in Millions)

12 FY 2016 Mail revenue includes a $1.1 billion adjustment. See supra n.9. 13 See Docket No. R2013-11, Order on Removal of the Exigent Surcharge and Related Changes to the Mail Classification Schedule, March 29, 2016 

(Order No. 3186).

Decrease in revenue is denoted by (). Numbers may not add across due to rounding.

Source: Library Reference PRC-LR-ARC2017/1, March 29, 2018; Docket No. ACR2017, Library Reference PRC-LR-ACR2016/1, March 28, 

2017; Library Reference USPS-FY17-42, December 29, 2017.
CHAPTER II | 13

 (4,000)

 (3,000)

 (2,000)

 (1,000)

 -

 1,000

 2,000

2010 2011 2012 2013 2014 2015 2016 2017

Change (in Millions)

Change in Revenue due to change in Revenue/Piece Change in Revenue due to change in Volume Change in Total Revenue

Fiscal Year

Figure II-1

Change in Market Dominant Revenue Due to Changes In Average Revenue per Piece

and Total Mail Volumes, FY 2010 – FY 2017

($ In Millions)

Source: Postal Regulatory Commission (PRC) derived from Postal Service Revenue, Pieces and Weight Report, FY 2010–2017.

Change in Revenue Due to Change in Volume

Change in Revenue Due to Change in Revenue/Piece

Change in Total Revenue

Figure II-1 isolates the change in Market 

Dominant revenue due to changes in average 

revenue per piece and changes in mail volume for 

each year since FY 2010. As shown in Figure II-1, 

the FY 2017 change in total Market Dominant 

revenue was the largest since FY 2012.
14 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

Table II-4 shows that for Market Dominant 

products, both declines in revenue per piece 

and declining volumes caused total revenue to 

decrease by $3.1 billion in FY 2017.14 In FY 2016, 

Market Dominant products generated exigent 

surcharge revenue for six months before the 

surcharge expired in April 2016. The expiration 

of the exigent surcharge is the primary reason for 

the decline in revenue per piece in FY 2017.15 For 

First-Class Mail, Marketing Mail, and Periodicals, 

the revenue decline was predominately due to 

reductions in volume.

14 The $3.1-billion decrease in Market Dominant revenue excludes “Other Income” which consists of appropriations, investment income, free military mail 

revenue, and any accounting estimate adjustments.

15 The change in revenue per piece is affected by more than just rate changes. Changes in mail mix, average weight per piece, and—in the case of 

Periodicals—changes in the editorial/advertising content, all influence the overall average revenue per piece. However, the predominant factor affecting 

changes in revenue per piece is generally changes in rates.

Table II-4

Disaggregation of Change in Market Dominant Revenue, FY 2017

($ in Millions)

Decrease in revenue is denoted by (). Numbers may not add across due to rounding.

Source: Docket No. ACR2017, Library Reference USPS-FY17-42; Docket No. ACR2016, Library Reference USPS-FY16-42, December 29, 2016.

Change in Revenue 

from Changes in Revenue 

per Piece

Change in Revenue 

from Changes in Volume 

per Piece

Net Change in Revenue

First-Class Mail $(753) $(1,184) $(1,938)

Marketing Mail (444) (559) (1,003)

Periodicals (55) (77) (132)

Package Services (35) 37 2 

Special Services (211) 174 (37)

Total Market Dominant $(1,499) $(1,609) $(3,108)
CHAPTER II | 15

COMPETITIVE PRODUCT REVENUE 

COMPARED TO PRIOR YEAR

Table II-5 compares revenue for Competitive 

products between FY 2017 and FY 2016. 

Competitive products’ overall revenue increased 

$2.2 billion or 11.9 percent. The Competitive 

product price increase (effective January 22, 

2017), transfer of First-Class Mail Retail (SinglePiece) from the Market Dominant category, and 

higher volume primarily contributed to the 

additional revenue.

FY 2017 FY 2016 $ Variance % Variance

Priority Mail $8,340 $7,785 $555 7.1%

Total Ground 6,194 5,192 1,002 19.3%

First-Class Packages 2,787 2,076 711 34.2%

Priority Mail Express 766 809 (43) (5.3%)

International 1,743 1,792 (49) (2.7%)

Ancillary and Special Services 860 842 18 2.1%

Subtotal Competitive Products Mail and Services Revenue $20,690 $18,496 $2,194 11.9%

Other Revenue 134 111 23 20.5%

Total Adjusted Competitive Products Mail and Services Revenue $20,824 $18,607 $2,217 11.9%

Table II-5

Competitive Product Revenue, FY 2017 and FY 2016 

($ in Millions)

Decrease in revenue is denoted by (). Numbers may not add across due to rounding.

Source: Library Reference PRC-LR-ACR2017/1; Library Reference PRC-LR-ACR2016/1; Library Reference USPS-FY17-42.
16 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

EXPENSE ANALYSIS AS COMPARED 

TO PRIOR YEAR

As shown in Table II-6, total expenses declined 

$4.7 billion (6.1 percent) in FY 2017. Although 

total operating expenses increased by $1.2 

billion, higher discount rates and changes in 

actuarial valuations shown below (as the noncash change to workers’ compensation liability 

and lower statutory retirement expense accruals) 

lowered total expenses in FY 2017.

PERSONNEL EXPENSES AS SHARE 

OF TOTAL EXPENSES

In FY 2017, the share of total expenses comprised 

of personnel expenses, excluding systemwide 

personnel costs for non-cash adjustment to 

workers’ compensation and amortization costs of 

unfunded retirement liabilities, was 74.5 percent. 

This was an increase of 5.3 percentage points 

from FY 2016, when these expenses constituted 

69.2 percent of total expenses. In FY 2017, the 

share of total expenses comprised of personnel 

Table II-6

Total Expenses, FY 2017 and FY 2016 

($ in Millions)

Decrease in expenses is denoted by (). NM denotes not meaningful. Numbers may not add across due to rounding.

Source: PRC derived from Postal Service National Trial Balance September 2017, November 14, 2017; Postal Service National Trial 

Balance September 2016, November 15, 2016.

 % of Total Expenses

FY 2017 FY 2016 $ Variance % Variance FY 2017 FY 2016

Compensation & Benefits Expenses:

 Salaries and Benefits 48,793 $48,115 $678 1.4% 67.6% 62.6%

 Workers' Compensation – Cash Outlays 1,415 1,468 (53) (3.6%) 2.0% 1.9%

Annuitant Health Benefits – 

Current Payment 3,305 3,305 0 0.00% 4.6% 4.3%

 Other Personnel Related 315 326 (11) (3.4%) 0.4% 0.4%

Subtotal Personnel Expenses Excluding 

Systemwide Personnel Expenses $53,828 $53,214 $614 1.2% 74.5% 69.2%

Transportation 7,238 6,992 246 3.5% 10.0% 9.1%

Other Expenses 9,743 9,431 312 3.3% 13.5% 12.3%

Total Operating Expenses $70,809 $69,637 $1,172 1.7% 98.1% 90.6%

Systemwide Personnel Expenses:

 Non-Cash Change to Workers' 

 Compensation Liability (2,212) 1,214 (3,426) NM (3.1%) 1.6%

 Amortization of Unfunded RHB (FY 2017), 

 Statutory Accrual (FY 2016)

955 5,800 (4,845) (83.5%) 1.3% 7.5%

 Amortization of Unfunded FERS Liability 917 248 669 269.8% 1.3% 0.3%

 Amortization of Unfunded CSRS Liability 1,741 0 1,741 NM 2.4% 0.0%

Total Expenses $72,210 $76,899 $(4,689) (6.1%) 100.0% 100.0%
CHAPTER II | 17

expenses including systemwide personnel 

costs, was 76.4 percent. This was a decrease 

of 2.2 percentage points from FY 2016, when 

these expenses constituted 78.6 percent of total 

expenses. In FY 2017, the favorable change in the 

non-cash adjustment to workers’ compensation 

liability offset the accrual of the amortization 

of the unfunded CSRS liability, which is a new 

payment this year.

Other non-personnel related expenses, such 

as purchased transportation costs, were 10 

percent of total expenses—an increase in share 

of 0.9 percentage points from FY 2016. The 

remaining 13.5 percent share of total expenses 

is comprised of Other Expenses,18 and increased 

1.2 percentage points from the prior year.

PERSONNEL EXPENSES

Figure II-2 illustrates the composition of FY 

2017 personnel expenses. Compensation 

accounts for the largest portion of personnel 

expenses, representing 67.0 percent of total 

personnel costs.

Retirement-related expenses are the next 

largest component of total personnel expenses, 

at 24.5 percent.

Compensation

67.0%

Other 0.6%

Workers' Compensation

(1.4)%

Retirement Health

Benefit Normal Costs

6.0%

FERS Normal Costs, Social 

Security, & TSP

12.0%

RHB, FERS &CSRS 

Accruals

6.5%

Retirement Related

24.5%

Health 

Benefits 

9.3%

Source: Postal Service FY 2017 Form 10-K at 23, 25, 30, and 31. 

Figure II-2

Total Personnel Expenses, FY 2017

18 Other expenses comprise of supplies and services, depreciation and amortization, rent and utilities, vehicle maintenance service, delivery vehicle fuel, 

information technology and communications, rural carrier equipment maintenance, and miscellaneous costs. Postal Service FY 2017 Form 10-K at 35.
18 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

Table II-7 shows that the total personnel 

expenses for FY 2017 were $5.2 billion lower 

than in FY 2016. This decline was largely the 

result of FY 2017 changes to the Postal Service’s 

retirement funding requirements detailed 

earlier and the favorable change in the noncash adjustment to the workers’ compensation 

liability.19 Total operating personnel expenses 

increased by $614 million compared to FY 2016, 

with compensation, retirement (service costs for 

FERS), and health benefit expenses all increasing.

Total compensation is comprised of salaries for 

employees (full-time career, part-time career, 

and non-career), overtime and leave pay, and 

performance or arbitration awards. There are 

several cost drivers for compensation, including 

contractual pay increases, inflation used to 

calculate semi-annual Cost of Living Allowances 

(COLAs), number of overtime workhours, 

and the composition of the workforce. Total 

compensation increased by $0.4 billion compared 

to FY 2016 primarily due to contractual salary 

increases,20 COLAs, and additional workhours 

necessitated by the growing demand for more 

labor-intensive shipping services.21

19 Workers’ compensation expense consists of cash payments, miscellaneous expenses and the net increase (decrease) in the workers’ compensation liability. 

In FY 2017, the decrease in the workers’ compensation liability was higher than the cash payments and miscellaneous expenses.

20 Postal Service FY 2017 Form 10-K at 23.

21 Id. at 25.

Decrease in expenses is denoted by (). NM denotes not meaningful. Numbers may not add across due to rounding.

Source: PRC derived from Postal Service National Trial Balance September 2017; Postal Service National Trial Balance 

September 2016. 

Table II-7

Breakdown of Total Personnel Expenses, FY 2017 and FY 2016

($ in Millions)

FY 2017 FY 2016 $ Variance % Variance

Total Compensation $37,026 $36,634 $392 1.1%

Retirement 6,604 6,509 95 1.5%

Health Benefits – Current Employees 5,163 4,972 191 3.8%

Workers' Compensation – Cash Outlays 1,415 1,468 (53) (3.6%)

Normal Costs of Retiree Health Benefits 3,305 3,305 0 0%

Other Compensation 315 326 (11) (3.4%)

Total Operating Personnel Expenses $53,828 $53,214 $614 1.2%

Non-Cash Change to Workers' Compensation Liability (2,212) 1,214 (3,426) NM

Amortization of Unfunded RHB (FY 2017), Statutory 

Accrual (FY 2016)

955 5,800 (4,845) (83.5%)

Amortization of Unfunded FERS Liability 917 248 669 269.8%

Amortization of Unfunded CSRS Liability 1,741 0 1,741 NM

Total Personnel Expenses $55,229 $60,476 $(5,247) (8.7%)
CHAPTER II | 19

The Postal Service’s workforce is composed 

of career (full-time and part-time) and noncareer employees, which include postal support 

employees, city carrier assistants, mailhandler 

assistants, and other non-career employees. 

Table II-8 shows the number of employees by 

type for FY 2015, FY 2016, and FY 2017.

In FY 2017, the Postal Service recorded its first 

decline in career employees since FY 2014. From 

FY 1999 through FY 2014, the Postal Service 

reduced the number of career employees every 

year, resulting in a total reduction of nearly 

309,000 career employees. In FY 2015 and FY 

2016, the number of career employees increased 

by approximately 20,600. In FY 2017, the 

Postal Service reduced its career workforce by 

6,000 employees and increased its non-career 

workforce by 10,000 employees. According to 

the Postal Service, during FY 2017 and FY 2016, 

72,000 non-career employees were converted 

to career status to offset attrition of career 

employees, primarily through retirement.22

A tentative bargaining agreement reached with 

the National Association of Letter Carriers 

(NALC) in 2017 included a wage increase of 

2.5 percent over the life of the contract, with 

1.2 percent applied retroactively to November 

2016.23 The agreement also included a 

consolidation of the current two pay grades 

into a single pay grade, and a reduction in the 

employer share of health insurance premiums 

beginning in 2018.24

Table II-8

Postal Service Employee Complement, FY 2015 – FY 2017

FY 2017 FY 2016 Change FY 2017 

over FY 2016 FY 2015 Change FY 2016 over FY 2015

Career Employees 503,103 508,908 (5,805) 491,863 17,045 

Postal Support Employees (PSE) 26,823 26,368 455 29,312 (2,944)

City Carrier Assistants (CCA) 44,486 40,436 4,050 37,767 2,669 

Mailhandler Assistants (MHA) 6,463 5,280 1,183 5,322 (42)

Other Non-Career 63,249 58,797 4,452 57,573 1,224 

Total On-Roll Employees 644,124 639,789 4,335 621,837 17,952 

Decrease in amounts is denoted by (). Numbers may not add across due to rounding.

Source: On-Roll and Paid Employee Statistics (ORPES), PP 20-2017, September 2017; ORPES, September 2016, October 6, 2016; 

ORPES, September 2015, September 24,2015.

22 Postal Service FY 2017 Form 10-K at 24.

23 Id. at 25. 24 Id.
20 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

Figure II-3 illustrates the change in workhours 

since FY 2003.

From FY 1999 through FY 2014, the Postal 

Service reduced total workhours by 

approximately 527 million. In FY 2015 and FY 

2016, the number of workhours increased by 

20.9 million (1.9 percent) and 29.7 million 

(2.6 percent), respectively. In FY 2017, the 

Postal Service experienced a smaller increase in 

workhours. Workhours increased by 6 million 

(0.5 percent), which the Postal Service states 

is primarily due to the continued growth in 

delivery points and the higher volume of shipping 

and packages.25 The slower rate of increase in 

workhours in FY 2017 compared to the prior two 

years is largely the result of declining volumes of 

First-Class Mail and Marketing Mail.26

Figure II-3

Change in Workhours, FY 2003 – FY 2017

(140,000)

(120,000)

(100,000)

(80,000)

(60,000)

(40,000)

(20,000)

0

20,000

40,000

200320042005200620072008200920102011201220132014201520162017

Change in Number of Workhours 000's)

Fiscal Year

Source: Postal Service Form 10-K and Annual Reports, FY 2003-2017. 

25 Postal Service FY 2017 Form 10-K at 24.

26 Id.
CHAPTER II | 21

During FY 2017, the number of delivery points 

increased by approximately 1.2 million, which 

led to higher workhours in City Delivery (1.5 

percent) and Rural Delivery (3.0 percent) 

categories.27 In FY 2017, workhours also 

increased in Customer Service (0.2 percent) and 

Vehicle Maintenance (0.8 percent) categories. 

Workhours declined in Mail Processing (1.1 

percent), Plant & Equipment (2.2 percent), and 

Other (3.7 percent) categories.28 The overall 

decline in the rate of growth in workhours 

compared to the prior year is primarily due to 

the declining volumes in First-Class Mail and 

Marketing Mail.29

Table II-9

Workhours by Function (Thousands of Workhours), FY 2015 – FY 2017

FY 2017 FY 2016

% Variance

FY 2017 over 

FY 2016 FY 2015

% Variance 

FY 2016 over 

FY 2015

Mail Processing 202,069 204,403 (1.1%) 200,661 1.9%

Customer Service 170,725 170,377 0.2% 159,249 7.0%

Delivery Service:

 City Delivery 422,811 416,646 1.5% 403,983 3.1%

 Rural Delivery 197,574 191,806 3.0% 184,726 3.8%

Maintenance:

 Plant & Equipment 64,477 65,946 (2.2%) 66,741 (1.2%)

 Vehicle 28,877 28,637 0.8% 28,153 1.7%

 Other 77,345 80,281 (3.7%) 84,886 (5.4%)

Total Workhours 1,163,878 1,158,096 0.5% 1,128,399 2.6%

Decrease in amounts is denoted by (). Numbers may not add across due to rounding.

Source: Docket No. ACR2017, Responses of the United States Postal Service to Questions 1-19 of Chairman’s Information 

Request No. 2, January 17, 2018, question 3, Excel file “ChIR.2.Q3.LDC.Workhours - FY17.xlsx.” Docket No. ACR2016, 

Responses of the United States Postal Service to Questions 1-2, 4-9, 11-13, 15-19, 23, 28, and 31-33 of Chairman’s 

Information Request No. 3, January 13, 2017, question 1, Excel file “ChIR.3.Q.1.LDC.Workhours.xlsx.” 

27 Postal Service Form 10-K at 24.

28 The “Other” category represents Operations Support, Finance, Human Resources, Administration, Training, and Rehabilitation workhours.

29 Id.
22 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

The productive hourly wage rates are shown in 

Table II-10. The productive hourly wage rate for 

clerks increased 1.7 percent, compared to the 

prior year. The productive hourly wage rate for 

mailhandlers and city delivery carriers declined 

by 0.2 and 1.1 percent, respectively, compared 

to the prior year. For the two-year period from 

FY 2015 through FY 2017, the productive hourly 

wage rate has increased in every category 

except for clerks, mailhandlers, and city delivery 

carriers which declined by 1.2, 1.3, and 2.2 

percent, respectively.30

Workers’ compensation expenses decreased 

$3.5 billion in FY 2017. Workers’ compensation 

expenses consist of a cash payment and a noncash change in long term workers’ compensation 

liability. The cash payment is made to the United 

States Department of Labor for the current 

year’s cost of medical and compensation benefits 

payment and an administrative fee. The noncash change in long term workers’ compensation 

liability includes actuarial revaluations of 

existing cases and new cases, initial costs of 

new cases for the year, and any changes in the 

Table II-10

Productive Hourly Wage Rates ($ per Workhour), FY 2015 – FY 2017

Segment/Subsegment FY 2017 FY 2016

% Change 

FY 2017 over 

FY 2016

FY 2015

% Change 

FY 2016 over 

FY 2015

Supervisors & Technicians $51.54 $50.65 1.8% $50.12 1.0%

Clerks 39.94 39.29 1.7% 40.44 (2.8%)

Mailhandlers 40.37 40.44 (0.2%) 40.91 (1.2%)

City Delivery Carriers 40.43 40.90 (1.1%) 41.32 (1.0%)

Vehicle Drivers 45.61 43.44 5.0% 43.34 0.2%

Rural Carriers 36.48 36.42 0.1% 36.21 0.6%

Building Services 41.67 39.60 5.2% 40.06 (1.1%)

Operating Equipment 54.24 53.55 1.3% 53.21 0.6%

Building Equipment 50.40 49.43 2.0% 49.07 0.7%

Motor Vehicle Service 48.65 47.34 2.8% 46.70 1.4%

Headquarters 67.72 64.24 5.4% 63.71 0.8%

Decrease in amounts is denoted by (). Numbers may not add across due to rounding. 

Source: Library Reference USPS-FY17-7, December 29, 2017; Docket No. ACR2016, Library Reference PRC-ACR2016/1; Docket No. 

ACR2015, Library Reference PRC-ACR2015/1, March 27, 2016.

30 The percent change from FY 2015 through FY 2017 is calculated by adding the percent change from FY 2016 to FY 2017 and the percent change from 

FY 2015 to FY 2016.
CHAPTER II | 23

discount rate used to estimate the amount of 

current funds needed to settle all claims in the 

current year. In FY 2017, the non-cash change 

in long term workers’ compensation liability 

resulted in a $2.2 billion decrease in liability. 

Table II-11 disaggregates components factoring 

into the workers’ compensation expense for the 

past two years.

Table II-11

Components of Workers’ Compensation Expense, FY 2017 and FY 2016

($ in Millions)

FY 2017 FY 2016 $ Variance % Variance

Medical Claims Payments $1,264 $1,396 $(132) (9.5%)

Administrative Fee 151 72 79 109.7%

Cash Outlays $1,415 $1,468 $(53) (3.6%)

(Decrease) Increase in Long Term Workers' 

Compensation Obligation

 (2,212) 1,214 (3,426) (282.2%)

Workers' Compensation Expense $(797) $2,682 $(3,479) (129.7%)

Decrease in expenses is denoted by (). Numbers may not add across due to rounding. 

Source: Postal Service FY 2017 Form 10-K at 69.

NON-PERSONNEL EXPENSES

Table II-12 shows transportation costs by 

category, which is a major component of nonpersonnel related expenses, and which accounted 

for 10 percent of total costs. See infra Table II-7.

Total transportation expenses increased by 

3.5 percent from FY 2016 to FY 2017. Highway 

transportation costs increased by 6.3 percent, 

while air transportation costs increased by 0.5 

percent from the prior year. According to the 

Postal Service, these increases were primarily 

due to higher prices per mile on contract routes 

and an increase in average jet fuel prices.31 

These increases were offset slightly by an 

$11 million-decline in international 

transportation costs.

Table II-12

Transportation Costs by Category, FY 2017 and FY 2016 ($ in Millions)

FY 2017 FY 2016 $ Variance % Variance

Highway Transportation $4,070 $3,827 $243 6.3%

Air Transportation 2,481 2,469 12 0.5%

International Transportation 631 642 (11) (1.7%)

Other Transportation 56 54 2 3.7%

Total Transportation $7,238 $6,992 $246 3.5%

31 Postal Service FY 2017 Form 10-K at 34.

Decrease in expenses is denoted by (). Numbers may not add across due to rounding. 

Source: Postal Service FY 2017 Form 10-K at 34.
24 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

Table II-13 shows all other non-personnel related 

expenses increased by $0.3 billion in FY 2017. 

The largest increase was in supplies and services 

expenses, which increased by $0.2 billion in 

FY 2017. According to the Postal Service, this 

was the result of an increase in information 

security services expenses.32 This increase was 

partially offset by declines in depreciation and 

miscellaneous other expenses. Miscellaneous 

other expenses consist mainly of travel, training, 

repairs and contingency accounts.

Decrease in expenses is denoted by (). 

Numbers may not add across due to rounding. 

Source: Postal Service FY 2017 Form 10-K at 35.

Table II-13

Other Non-Personnel Expenses, FY 2016 and FY 2017

($ in Millions)

FY 2017 FY 2016 $ Variance % Variance

Supplies and Services $2,980 $2,755 $225 8.2%

Depreciation and Amortization 1,677 1,740 (63) (3.6%)

Rent and Utilities 1,590 1,560 30 1.9%

Vehicle Maintenance Services 640 624 16 2.6%

Delivery Vehicle Fuel 409 359 50 13.9%

Information Technology and 

Communications

 914 852 62 7.3%

Rural Carrier Equipment 

Maintenance

 503 484 19 3.9%

Miscellaneous Other 1,030 1,057 (27) (2.6%)

Total Other Non-Personnel 

Expenses

 $9,743 $9,431 $312 3.3%

TOTAL FACTOR PRODUCTIVITY

Total Factor Productivity (TFP) is a measure 

of Postal Service productivity for any 

given year. TFP is calculated as the ratio of 

Workload (outputs and network) to Inputs. 

The inputs index includes a combination of 

labor (workhours), capital, and materials. The 

outputs index is the weighted average of mail 

volumes and miscellaneous outputs. The network 

index represents the delivery network and is 

the number of possible deliveries. Finally, the 

workload index is a combination of the outputs 

and the network indices.

TFP declined slightly for the second year since 

FY 2009. Total workload increased 1.3 percent in 

FY 2017. Workload increased due to the growth 

in delivery points and weighted mail volume, 

particularly parcel volume, which requires 

more resources to process than letter or flatshaped mail. In FY 2017, capital inputs increased 

1.4 percent and investment in buildings and 

equipment also increased. Labor input declined 

for the first time since FY 2014, by 1.1 percent. 

The growth in shipping and packages increased 

materials usage. In FY 2017, other factors such as 

the growth in workhours, level of employment, 

and price of labor also contributed to the slight 

decline in the TFP. Figure II-4 below shows the 

trend in TFP from FY 1971 through FY 2017.

32 Id at 35.
CHAPTER II | 25

Source: Source: Library Reference USPS-FY17-43, Postal Service Annual Tables, FY 2017 TFP.

Figure II-4

Postal Service Total Factor Productivity, FY 1971 – FY 2017

($ in Billions)

Comparison of Postal Service Actual to Operating Plan

The Postal Service’s FY 2017 Operating Plan, as 

outlined in its 2017 Integrated Financial Plan 

(IFP), projected a net loss of $4.2 billion in FY 

2017.33 The actual total net loss of $2.7 billion 

was $1.5 billion less than the Postal Service 

estimated. Total revenue was $1 billion less 

than planned while total operating expenses 

were $0.3 billion more than planned. However, 

because retirement accruals were $0.6 billion 

less than anticipated, the Postal Service’s net loss 

was smaller than it had initially projected. Table 

II-14 compares actual FY 2017 results with the 

estimated results in the Operating Plan.

As seen in Table II-15, revenue from all Market 

Dominant mail was lower than expected. 

In total, Market Dominant mail generated $3.2 

billion less than forecasted. However, revenue 

from Competitive mail and Other Parcels was $2.3 

billion greater than what was projected, which 

partially offset the other declines. International 

mail revenue was $0.1 billion less than planned.

Total volume was 3.4 billion pieces less than 

expected, primarily due to less than planned 

volume for Marketing Mail. The only category 

that exceeded expectations was Competitive 

and Other Parcels, with 0.2 billion more pieces 

than expected. Table II-16 compares volumes 

for FY 2017 with the volume projected in the 

Operating Plan.

33 United States Postal Service Fiscal Year 2017 Integrated Financial Plan, December 2, 2016, at 1 (Postal Service 2017 Integrated Financial Plan). See also 

USPS Preliminary Financial Information (Unaudited), September 2017, November 14, 2017.

100

105

110

115

120

125

130

135

140

197119731975197719791981198319851987198919911993199519971999200120032005200720092011201320152017

Index (1970 = 100)

Fiscal Year

Average Annual Growth

1970 - 2006 = 0.53%

2007 - 2017= 0.55%
26 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

Total expenses were $2.5 billion less than 

anticipated. Operating expenses were $0.3 billion 

greater than expected. As shown in Table II-17, 

the compensation and benefits expense was 

$0.2 billion more than planned, primarily due to 

greater than expected workhours.

Total non-personnel expenses were $0.1 billion 

more than projected, the only negative variance 

being for supplies and services expenses 

($0.2 billion). Transportation expenses and 

depreciation slightly exceeded what was planned.

Table II-15

FY 2017 Actual and Operating Plan Revenue Broken Down by Categories Shown in IFP34

($ in Billions)

FY 2017 Actual FY 2017 Operating Plan $ Variance

First-Class Mail $25.6 $26.0 $(0.4)

Periodicals 1.4 1.4 (0.0)

Marketing Mail 16.6 17.7 (1.1)

Other 2.1 3.8 (1.7)

Competitive and Other Parcels 21.3 19.0 2.3 

International 2.7 2.8 (0.1)

Total Mail Revenue $69.7 $70.7 $(1.0)

Decrease in revenue is denoted by (). 

Numbers may not add across due to rounding. 

Source: November 15, 2017, Preliminary Financial Information, file “2017.11.15 September FY 2017 Monthly Report to 

the PRC--Report.pdf.” 

FY 2017 Actual FY 2017 Operating Plan Variance

Total Revenue $69.7 $70.7 $(1.0)

Total Operating Expense 71.0 70.7 0.3 

Net Operating Income/(Loss) $(1.3) $ - $(1.3)

Workers' Compensation Liability (2.2) 0 (2.2)

RHBF Unfunded Liability Amortization 1.0 2.8 (1.8)

FERS Unfunded Liability Amortization 0.9 0.2 0.7 

CSRS Unfunded Liability Amortization 1.7 1.2 0.5 

Total Net Income/(Loss) $(2.7) $(4.2) $1.5 

Decrease in revenue and expense is denoted by (). Increase in net loss is denoted by (). 

Numbers may not add across due to rounding. 

Source: USPS Preliminary Financial Information (unaudited), September 2017, November 14, 2017, file “2017.11.14 

September FY 2017 Monthly Report to the PRC--Report.pdf.”

Table II-14

FY 2017 Actual and Operating Plan Statement of Operations

($ in Billions)

34 The Postal Service FY 2017 IFP isolates volume from International and Parcels from the other categories. See Postal Service 2017 Integrated Financial Plan at 5.
CHAPTER II | 27

Table II-16

FY 2017 Actual and Operating Plan Volume Broken Down by Categories Shown in IFP35

(in Billions)

FY 2017 Actual FY 2017 Operating Plan $ Variance

First-Class Mail 58.8 59.4 $(0.6)

Periodicals 5.3 5.4 (0.1)

Marketing Mail 78.3 81.2 (2.9)

Other 0.4 0.4 - 

Competitive and Other Parcels 5.7 5.5 0.2 

International 1.0 1.0 - 

Total Mail Volume 149.5 152.9 $(3.4)

Decrease in amounts is denoted by (). 

Numbers may not add across due to rounding. 

Source: November 15, 2017, Preliminary Financial Information, file “2017.11.15 September FY 2017 Monthly Report to 

the PRC--Report.pdf.”

35 The Postal Service FY 2017 IFP isolates revenue from International and Parcels from the other categories. See FY 2017 IFP at 5.

Table II-17

Actual and Operating Plan Expenses, FY 2017

($ in Billions)

FY 2017 Actual FY 2017 Operating Plan $ Variance

Compensation & Benefits $53.8 $53.6 $0.2 

Transportation 7.2 7.1 0.1 

Supplies & Services 3.0 3.2 (0.2)

Depreciation 1.7 1.6 0.1 

Rent/Utilities/Other 5.3 5.2 0.1 

Total Operating Expenses $71.0 $70.7 $0.3

Workers’ Compensation Adj. (2.2) 0.0 (2.2)

RHB Unfunded Amortization 1.0 2.8 (1.8)

FERS Unfunded Amortization 0.9 0.2 0.7 

CSRS Unfunded Amortization 1.7 1.2 0.5 

Total Expenses $72.4 $74.9 $(2.5)

Decrease in amounts is denoted by ().

Numbers may not add across due to rounding.

Source: November 15, 2017, Preliminary Financial Information, file “2017.11.15 September FY 2017 Monthly Report to 

the PRC--Report.pdf.”
28 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

Analysis of Balance Sheets

This section analyzes the Postal Service’s financial 

situation and use of resources based on Balance 

Sheets data prepared according to U.S. Generally 

Accepted Accounting Principles. The analysis 

compares two points in time, September 30, 2017 

(FY 2017) and September 30, 2016 (FY 2016).

Table II-18 compares certain categories in the 

Postal Service’s asset and liability structure for 

FY 2017 with FY 2016. This analysis is derived 

from the Postal Service’s Balance Sheets.

Current assets are the sum of cash and cash 

equivalents, receivables, and supplies and 

prepayments that can be easily converted to 

cash for financing operations. Non-current assets, 

mainly buildings and equipment (capital assets), are 

more difficult to convert to cash in the short term.

Table II-18

Structure of Assets and Liabilities, FY 2017 and FY 2016

($ in Millions)

% of Total Assets

FY 2017 FY 2016 $ Variance FY 2017 FY 2016

Assets

Cash and Cash Equivalents 

(includes Restricted Cash)

 $10,804 $8,330 $2,474 39.4% 33.0%

Receivables 1,127 1,042 85 4.1% 4.1%

Supplies and Prepayments 134 140 (6) 0.5% 0.6%

 Total Current Assets 12,065 9,512 2,553 44.0% 37.7%

 Noncurrent Assets 15,329 15,707 (378) 56.0% 62.3%

Total Assets $27,394 $25,219 $2,175 100.0% 100.0%

% of Total Liabilities

FY 2017 FY 2016 $ Variance FY 2017 FY 2016

Liabilities

Retiree Health Benefits $38,160 $33,900 $4,260 44.3% 41.7%

Current Portion of Long-Term Debt 10,100 10,100 0 11.7% 12.4%

Deferred Revenue-Prepaid Postage 2,168 2,253 (85) 2.5% 2.8%

Other Current Liabilities 11,399 8,362 3,037 13.2% 10.3%

 Total Current Liabilities 61,827 54,615 7,212 71.8% 67.3%

Workers’ Compensation Costs, 

Noncurrent

 16,397 18,612 (2,215) 19.0% 22.9%

Noncurrent Portion of Long-Term Debt 4,900 4,900 - 5.7% 6.0%

Other Noncurrent Liabilities 2,994 3,074 (80) 3.5% 3.8%

 Total Noncurrent Liabilities 24,291 26,586 (2,295) 28.2% 32.7%

Total Liabilities $86,118 $81,201 $4,917 100.0% 100.0%

Decrease in amounts is denoted by (). 

Numbers may not add across due to rounding. 

Source: Postal Service FY 2017 Form 10-K at 46; PRC derived from September, 2017 National Trial Balance.
CHAPTER II | 29

Liabilities at the end of FY 2017 totaled $86.1 

billion, 71.8 percent of which were current 

liabilities. Current liabilities are obligations that 

will come due within one year while noncurrent 

liabilities are long-term financial obligations. 

Current liabilities consist largely of RHBF 

obligations and short-term borrowing. The 

Postal Service continued to accrue its unpaid 

RHB expenses, which totaled $38.2 billion at 

the end of FY 2017. This includes accruals for FY 

2012 through FY 2017 when the Postal Service 

was unable to pay down the obligation. This 

obligation is 61.7 percent of current liabilities. 

Most of the net liabilities consist of the RHBF 

payments, workers’ compensation liability 

($16.4 billion), and the total net debt owed to the 

Federal Financing Bank ($15 billion).

On the Balance Sheets, net deficiency represents 

the difference between total assets and total 

liabilities. This indicates whether assets were 

financed by borrowing (liability) or by capital 

contributions and accumulated earnings from 

prior years. Net deficiency occurs when liabilities 

are greater than assets.

At the end of FY 2017, the Postal Service recorded 

a $58.7 billion net deficit consisting of an 

accumulated deficit of $61.8 billion offset by capital 

contributions of $3.1 billion. This is primarily 

the result of several years of net operating losses 

starting in FY 2007. Negative net worth indicates 

that the Postal Service has spent both its initial 

capital and also the capital of its creditors. Its debts 

are no longer secured by its assets.

Because of its existing outstanding debt, the 

Postal Service must finance all current activity 

with internally generated cash. This limits its 

ability to invest in much needed equipment and 

other productive assets.36

Figure II-5

Categories of Assets and Liabilities, FY 2017

Source: Id. at 46.

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Assets Liabilities

In millions

Current Noncurrent

 Current Noncurrent

36 Postal Service FY 2017 Form 10-K at 36.
30 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

Figure II-5 shows the mix of the Postal Service’s 

asset and liability structure as of September 30, 

2017. The shortage of current assets (44 percent 

of total assets) to cover current liabilities (72 

percent of total liabilities) adversely affects the 

Postal Service’s financial condition. Noncurrent 

assets comprise 56 percent of total assets, while 

noncurrent liabilities only comprise 28 percent of 

total liabilities.

Working capital is the difference between 

current assets and current liabilities. In FY 2017, 

the Postal Service’s working capital was negative 

$49.8 billion.

During FY 2017, total assets increased by

 $2.2 billion primarily from a 39.4 percent 

increase in the cash balance. Aging capital 

assets and the continued restrictions on capital 

investment resulted in depreciation costs in 

excess of investments, which resulted in a net 

decrease in fixed assets of $0.4 billion.

Total liabilities increased by $4.9 billion dollars 

mainly due to personnel-related liabilities such 

as the accrual for the unpaid RHB expenses for 

FY 2017.

Assets

During FY 2017, total assets increased by $2.2 

billion, primarily from an increase in cash 

of $2.5 billion. Aging capital assets and the 

continued restriction in capital investment 

resulted in a decline in net property plant 

and equipment of $0.4 billion. The growth in 

cash reserves is likely the result of limited 

investment in capital infrastructure and 

equipment and the nonpayment of the statutory 

prefunding of the RHBF.

Figure II-6 illustrates the trend in the Postal 

Service’s net capital assets since FY 2007.

Figure II-6

Growth in Capital Assets, FY 2007 – FY 2017

Source: Postal Service FY 2007 to 2017 Forms 10-K. 

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
CHAPTER II | 31

The Postal Service continues to limit its capital 

expenditures to necessary safety, customer 

support, and high-return investments.37

Figure II-7 shows the breakdown of the Postal 

Service assets as of September 30, 2017.

Liabilities

In FY 2017, total liabilities increased by $4.9 billion, 

largely due to a higher balance in current liabilities. 

The RHB accrual increased by $4.2 billion.

The long-term portion of workers’ compensation 

declined by $2.2 billion in FY 2017. The long-term 

portion of workers’ compensation liability is highly 

sensitive to discount and inflation rates in actuarial 

adjustment and to new and existing claims.

Figure II-8 shows the current breakdown of 

the Postal Service’s liabilities as of 

September 30, 2017.

37 Postal Service FY 2017 Form 10-K at 37.

Figure II-8

Postal Service Liabilities Structure, September 30, 2017

Source: Postal Service FY 2017 Form 10-K at 46; PRC derived from September, 2017 National Trial Balance.

 

Source: Postal Service FY 2017 Form 10-K at 46; PRC derived 

from September, 2017 National Trial Balance.

 

Figure II-7

Postal Service Asset Structure, 

September 30, 2017

Current 

Receivables, 

4%

Cash and

Cash Equivalents, 

40%

Noncurrent

Assets, 

56%

Other Current

Liabilities, 19%

Other Long-Term 

Liabilities, 7%

Current Portion, 

53%

Long-Term 

Portion, 21%

Employee Related 

Liabilities, 

74%

Total Liabilities Breakdown of

Employee Related 

Liabilities
32 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

In addition to the liabilities recorded on the 

Postal Service’s Balance Sheets, there are other 

liabilities that are not recognized in the Postal 

Service’s financial statements. These liabilities 

are controlled and administered by OPM and 

relate to the assets and liabilities attributed to 

the Civil Service Retirement and Disability Fund 

(CSRDF) and the RHBF.38 The CSRDF provides 

pension benefits to retired and disabled Federal 

employees, including Postal Service employees 

covered by CSRS and FERS.39

In addition, the PAEA requires the Postal Service 

to report certain disclosures provided by OPM 

regarding the funded status of the CSRDF, 

specifically for postal employees and the Postal 

Service RHBF. This information is then reported 

on the Postal Service Form 10-K statements.

Analysis of Statements of Cash Flows

At the end of FY 2017, the Postal Service’s cash and 

cash equivalents excluding $0.3 billion in restricted 

cash were $10.5 billion. Cash and cash equivalents 

excluding restricted cash were $2.4 billion higher 

than at the end of FY 2016. The Postal Service’s 

average daily cash requirement is $0.4 billion; $10.5 

billion represents 34 days of operating cash.40

Table II-19 compares the Postal Service’s cash 

flows from FY 2009 to FY 2017.

Table II-20 illustrates the current liquidity 

position of the Postal Service. The Postal 

Service’s liquidity is limited to cash and cash 

equivalents excluding restricted cash, because 

the Postal Service exhausted its statutory 

borrowing limit in FY 2012. Its debt includes two 

revolving credit facilities that are fully drawn. 

Its fixed interest rate debt as of September 30, 

2017, consists of short-term borrowings from the 

Federal Financing Bank of $6.1 billion.41

38 See 5 U.S.C. § 8909a. 39 See 5 U.S.C. § 8348. 40 Postal Service FY 2017 Form 10-K at 35.

41 Id. at 61.
CHAPTER II | 33

Table II-19

Postal Service Statements of Cash Flows, FY 2009 – FY 2017 ($ in Millions)

Decrease in expenses is denoted by (). Numbers may not add across due to rounding. 

Source: Postal Service FY 2009 to FY 2017 Forms 10-K. 

FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Net Income/(Loss) $(3,794) $(8,505) $(5,067) $(15,906) $(4,977) $(5,508) $(5,060) $(5,591) $(2,742)

Non-Cash Items and Other 

Cash Flows 5,367 5,213 5,561 15,474 5,912 8,822 7,939 8,327 6,565 

Cash Flows from Investing 

Activities:

Decrease (Increase) in 

Restricted Cash (10) (28) (79) 66 13 (20) (38)

Purchase of Property and 

Equipment (1,839) (1,393) (1,190) (705) (667) (781) (1,222) (1,428) (1,344)

Proceeds from Sale of 

Property and Equipment 33 70 137 148 158 129 120 206 58 

Net Cash Used in Investing 

Activities (1,806) (1,323) (1,063) (585) (588) (586) (1,089) (1,242) (1,324)

Cash Flows from Financing 

Activities:

Increase (Decrease) in Debt 3,000 1,800 1,000 2,000 - - - - - 

Payments for Capital Leases (46) (50) (51) (51) (59) (58) (62) (51) (63)

U.S. Government 

Appropriations - Expensed (64) (63) (63) (129) (48) (90) - - - 

Net Cash (Used) Provided by 

Financing Activities 2,890 1,687 886 1,820 (107) (148) (62) (51) (63)

Net Increase/(Decrease) in Cash 2,657 (2,928) 317 803 240 2,580 1,728 1,443 2,436 

Cash Balance Beginning of Year 1,432 4,089 1,161 1,283 2,086 2,326 4,906 6,634 8,077 

Cash Balance End of Year $4,089 $1,161 $1,283 $2,086 $2,326 $4,906 $6,634 $8,077 $10,513 

Debt Outstanding $10,200 $12,000 $13,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 

Source: Id. at 48.

Table II-20

Total Postal Service Liquidity End of FY 2017 Compared to FY 2016

FY 2017 FY 2016

Cash and Cash Equivalents $10,513 $8,077 

Current Portion of Debt 10,100 10,100 

Long-Term Debt 4,900 4,900 

Total Debt $15,000 $15,000 

Statutory Debt Limit 15,000 15,000 

Available Debt - - 

Total Liquidity (Cash + Available Debt) $10,513 $8,077 
This page has intentionally been left blank.
CHAPTER III | 35

Overview

This chapter provides an in-depth analysis of the volume, revenue, and cost 

trends for each class of mail. The first section describes the calculation of 

attributable and institutional cost and describes changes in cost attribution 

methodology, and changes in institutional cost as a percentage of total cost, 

referred to as institutional cost share. It also examines the overall trends for 

Market Dominant and Competitive products and services.

PHOTOS BY ORHAN CAM

CHAPTER III

Volume, Revenue, 

and Cost Trends

PHOTO BY USPS
36 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

The second section provides a comparison of 

volume, revenue, and cost between FY 2016 

and FY 2017. It also includes a trend analysis 

that highlights changes in volume, revenue, and 

cost that have occurred since FY 2007. For most 

comparisons, FY 2007 is used as the base year 

because it reflects the mail reclassifications that 

resulted from the PAEA. Other comparisons use 

more recent fiscal years. The section also includes 

an analysis by cost segment and/or component.

Overall Volume, Revenue, and Cost Trends

Attributable and Institutional Cost Relationships

39 U.S.C. § 3622(c)(2) defines attributable cost as 

the “direct and indirect postal costs attributable 

to each class or type of mail service through 

reliably identified causal relationships plus that 

portion of all other costs of the Postal Service 

reasonably assignable to such class or type[.]” 

In Order No. 3506, the Commission revised the 

methodology for determining attributable cost to 

include inframarginal costs developed as part of 

the estimation of incremental costs.1 Before that 

order, attributable cost only included the sum of 

volume-variable costs,2 which, in the aggregate, 

increase as volume increases and decrease as 

volume decreases, and product-specific fixed 

costs, which are costs caused by a specific 

product or class but do not vary with volume.3

FY 2017 is the first year that the Postal Service 

implemented in the CRA Report the expanded 

scope of cost attribution discussed in Order No. 

3506. In this chapter, the Commission uses the 

revised definition of attributable cost to evaluate 

FY 2017 product and class costs. Attributable 

costs are now equal to incremental costs, which 

reflect the total marginal costs of the volume in 

a class or product. Incremental costs are subadditive, meaning that the sum of the attributable 

costs of all products in a class is not equal to the 

attributable cost of the class as a whole.4

In this chapter, at both the product and the 

class level, the Commission uses attributable 

(incremental) cost for analysis. The change in 

methodology only impacts the comparison to 

FY 2016 results slightly because the attributed 

inframarginal costs make up less than 3 percent 

of each product’s attributable cost. Unlike in 

previous years, institutional cost in FY 2017 does 

not include all inframarginal cost because some 

inframarginal costs are now attributed.

In this chapter, the Commission also analyzes 

changes in cost for certain cost segments 

and components. VVPPS are distributed to 

products using distribution keys that reflect 

the underlying cost driver.5 For comparisons of 

cost segments and components, the Commission 

uses VVPPS instead of the revised definition of 

attributable cost.6

1

 Docket No. RM2016-2, Order Concerning United Parcel Service, Inc.’s Proposed Changes to Postal Service Costing Methodologies (UPS Proposals One, Two, 

and Three), September 9, 2016 (Order No. 3506). UPS appealed Order No. 3506 to the United States Court of Appeals for the District of Columbia Circuit. 

United Parcel Service, Inc. v. Postal Regulatory Comm’n, No. 16-1354 (D.C. Cir. filed Oct. 7, 2016). Oral arguments were heard on January 22, 2018, and a 

decision is pending.

2

 Total volume-variable cost is calculated by multiplying total cost by the volume variability ratio for each cost segment.

3

 Volume-Variable plus Product-Specific (VVPPS).

4

 The Postal Service generally exhibits declining marginal costs. As a result, the incremental cost of a class includes additional inframarginal costs that are not 

included in the incremental cost of the individual products within the class.

5 The Postal Service assigns these costs to each product according to methodologies approved by the Commission. Changes to those methodologies are reviewed 

by the Commission in informal rulemaking proceedings, and members of the general public are given the opportunity to comment in such proceedings.

6 The analysis of a product’s unit costs by cost component is intended to provide insight into the cost of the activities performed in handling each mailpiece. 

For this reason, these costs are piggybacked to include the indirect costs of each activity. Similarly, inframarginal costs are excluded because this analysis is 

focused on the cost of a piece of mail, as opposed to the cost of a product or class of mail.
CHAPTER III | 37

Institutional cost cannot be attributed to a 

specific product or service and is equal to 

total cost minus total attributable cost. While 

sometimes referred to as “fixed cost,” it is more 

accurately characterized as “common cost” 

because it includes costs that are variable but 

not causally related to an individual product 

or class. Institutional cost includes costs for 

carrier network travel time, amortization of RHB 

unfunded liability, amortization of CSRS unfunded 

liability apportioned to prior years, and various 

administrative costs. The institutional cost share 

is the ratio of total institutional cost to total costs. 

Holding all else equal, a higher mail volume results 

in a lower institutional cost share and a lower mail 

volume results in a higher institutional cost share.7

In addition to the change in the definition of 

attributable cost, two other methodological changes 

also affected attributable cost calculations. These 

include changes to capacity variability for purchased 

highway transportation costs8 and an adjustment to 

city carrier street time parcel proportions.9 

The Commission has previously discussed how 

institutional cost share changes as volume 

increases and decreases. The Commission has 

also discussed how changes in operational factors 

such as volume mix and volume weighted by the 

average attributable cost of individual products 

will also change the institutional cost share. There 

are also non-operational factors such as Generally 

Accepted Accounting Principles changes in the law 

and Commission approved costing methodologies 

which have an effect on the ratio. Id. Institutional 

cost is primarily driven by accruals for retirement 

related expenses, workers’ compensation, and 

delivery network costs. Therefore, institutional 

cost will increase or decrease depending on 

changes to retirement obligations (initiated by 

OPM), interest rate fluctuations that impact the 

workers’ compensation liability, and increases in 

delivery points or changes due to restructuring 

routes. Table III-1 shows the causes of the changes 

in institutional cost each year since FY 2010. The 

largest drivers of the changes have been workers’ 

compensation and annuitant health benefits 

accounting adjustments, rather than changes in 

operational costs. In FY 2017, the supplemental 

contribution to CSRS was added to institutional 

cost. See Chapter 2 at page 10.

7 Postal Regulatory Commission Financial Analysis of United States Postal Service Financial Results and 10-K Statement, Fiscal Year 2014, April 1, 2015, at 35-

37 (FY 2014 Postal Regulatory Commission Financial Report).

8 Docket No. RM2016-12, Order on Analytical Principles Used in Periodic Reporting (Proposal Four), June 22, 2017 (Order No. 3973).

9 Docket No. RM2017-8, Order on Analytical Principles Used in Periodic Reporting (Proposal Four), December 1, 2017 (Order No. 4259).

10 For this analysis, Commission uses the Postal Service’s institutional cost figures, which reflect attribution of incremental costs at the product level, as 

opposed to the class level.

Source: The Postal Regulatory Commission derived from Cost Segment and Component Report, FY 2010 - FY 2017.

Table III-1

Main Sources of Change in Institutional Cost,10 FY 2010 – FY 2017

FY 2017 

($ 000)

FY 2016

($ 000)

FY 2015 

($ 000)

FY 2014

($ 000)

FY 2013

($ 000)

FY 2012

($ 000)

FY 2011

($ 000)

FY 2010

($ 000)

Workers' Compensation (3,419,553) 965,985 (654,814) 1,290,341 (2,600,835) (99,435) (48,990) 1,189,647 

Annuitant Health Benefits (4,913,951) 388,908 27,737 332,737 (5,124,055) 11,471,877 (5,109,985) 4,460,307 

CSRS Supplemental Liability 1,549,748 

City and Rural Carriers 461,070 387,579 465,085 (98,278) 42,613 314,106 281,666 122,766 

FERS Supplemental Liability 668,715 149,024 102,998 2,664 407 309 (276) 563 

Transportation 579,903 103,181 (31,117) (23,560) 15,148 21,239 46,419 7,033 

Supplies and Services 73,733 116,728 19,641 43,336 113,029 (56,587) 114,221 (100,798)

Clerks and Mailhandlers 35,231 99,575 239,558 54,748 28,205 (35,478) (110,222) (203,979)

Other 348,598 397,208 (435,196) (512,303) 187,858 (498,105) 362,786 (160,139)

Total Change (4,616,504) 2,608,187 (266,108) 1,089,686 (7,337,630) 11,117,927 (4,464,383) 5,315,400 
38 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

Market Dominant Products 

and Services

Table III-2 illustrates the changes in total volume, 

revenue, attributable cost, and contribution to 

institutional cost for Market Dominant products 

and services between FY 2016 and FY 2017.

Total Market Dominant revenue decreased by 6.1 

percent in FY 2017, after nearly no change for the 

previous three years. The decrease in revenue is 

primarily due to the removal of the temporary 

exigent surcharge that the Commission 

authorized in January 2014.11 The surcharge 

expired on April 10, 2016. Thus, FY 2017 is the 

Negative values are denoted by ().

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1. 

Table III-2

Market Dominant Volume, Revenue, and Cost, FY 2017 and FY 2016

FY 2017 FY 2016 Variance

Volume (Millions) 144,387 149,824 (3.6)%

Revenue ($ Millions) 47,788 50,894 (6.1)%

Attributable Cost ($ Millions) 28,794 28,267 1.9 %

Contribution to Institutional Cost ($ Millions) 18,994 22,626 (16.1)%

first full fiscal year in which the surcharge was 

not in effect. Lower Market Dominant volume in 

FY 2017 also had a negative effect on revenue.

Total attributable cost for Market Dominant 

products increased slightly, in part due to 

the methodology change for attributable cost 

described at the beginning of the section. Total 

attributable cost for Market Dominant products 

was 1.9 percent higher than in FY 2016. The 

decrease in revenue combined with the increase 

in attributable cost, resulted in a $3.7 billion 

decrease in total Market Dominant contribution 

to institutional cost.

In FY 2017, Market Dominant products accounted 

for 96.6 percent of total mail volume, a drop of 

0.5 percentage points from FY 2016. Revenue 

from these products as a percentage of total 

revenue decreased from 71.2 percent to 68.7 

percent. Market Dominant attributable cost as a 

percentage of total attributable cost decreased 

from 69.3 percent in FY 2016 to 67.4 percent in 

FY 2017.

Several Market Dominant products failed to 

generate sufficient revenue to cover attributable 

cost, resulting in negative contribution. The 

total negative contribution to institutional 

cost from these products amounted to $1.4 

billion, about $15 million more than in FY 2016. 

Five domestic mail products failed to cover 

their attributable cost: Marketing Mail Flats 

($668.9 million), Marketing Mail Parcels ($25.8 

million), Periodicals Outside County ($581.4 

million), Periodicals In-County ($26.7 million), 

and Package Services Media Mail/Library Mail 

($85.6 million). In addition, three services, 

Money Orders, International Services, and Collect 

on Delivery (COD), as well as First-Class Mail 

Inbound Letter Post had a negative contribution.

11 The surcharge was designed to offset the loss in total contribution associated with volume losses due to the Great Recession of 2008–2009.
CHAPTER III | 39

Market Dominant Volume Trends

Figure III-1 shows the total volume for Market 

Dominant products over the last eleven years. 

Since FY 2007, volume for Market Dominant 

products has declined by 66.2 billion pieces.

First-Class Mail and Marketing Mail accounted 

for 95.7 percent of total Market Dominant 

volume. First-Class Mail volume has declined 

by 36.6 billion pieces since FY 2007. However, 

in recent years the rate of decline has slowed 

significantly; since FY 2014, the average decrease 

was approximately 2.5 percent per year.

Marketing Mail volume has declined by 25.1 billion 

pieces since FY 2007. In FY 2017, Marketing Mail 

volume dropped by 2.6 billion pieces, representing 

a decrease of 3.2 percent from FY 2016. The FY 

2017 decline is a larger loss compared with the 

previous four years when Marketing Mail volume 

remained relatively steady.

Figure III-1

Market Dominant Volume, FY 2007 – FY 2017

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR 2016, PRC-LR-ACR2016/1; Docket No. ACR2015, Library 

Reference PRC-LR-ACR2015/1; FY 2007- FY 2014 ACD; Library Reference PRC-LR-1.

0.0

50.0

100.0

150.0

200.0

250.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Billions of Pieces

Fiscal Year

First-Class Mail Marketing Mail All Other Mail

First-Class Mail

Marketing Mail

All Other Mail
40 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

Market Dominant Revenue and Cost Trends

Total Market Dominant revenue and attributable 

cost have also declined since FY 2007. Total 

revenue declined by 24.3 percent and total 

attributable cost declined by 23.2 percent. Figure 

III-2 compares revenue and attributable cost 

since FY 2007.

In FY 2017, the decline in total Market Dominant 

revenue (6.1 percent) was considerable, 

representing the largest decrease since FY 2013. 

As noted previously, the decrease in revenue 

can be mainly attributed to the expiration of the 

exigent surcharge. The exigent surcharge added 

$1.4 billion in additional revenue in FY 2014, $2.1 

billion in additional revenue in FY 2015 and $1.1 

billion in additional revenue in FY 2016.

Figure III-2

Market Dominant Revenue and Attributable Cost, FY 2007 – FY 2017

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1; Docket No. 

ACR2015, Library Reference PRC-LR-ACR2015/1; Docket No. ACR2014, Library Reference PRC-LR-ACR2014/1; FY 2007- FY 2013 

ACD; Library Reference PRC-LR-1.

Market Dominant 

Revenue 

Market Dominant 

Attributable Cost

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

$ in Billions

Fiscal Year

Market Dominant Revenue Market Dominant Attributable Cost
CHAPTER III | 41

Competitive Products and Services

Both volume and revenue for Competitive 

products increased in FY 2017. Table III-3 

compares the total volume, revenue, and cost of 

these products and services between FY 2016 

and FY 2017.

Volume grew 13.4 percent in FY 2017 compared 

with 13.6 percent in FY 2016. Revenue also 

increased by 11.9 percent or $2.2 billion. 

Attributable cost increased by 11.2 percent in 

FY 2017. Since revenue growth outpaced the 

increase in attributable cost, contribution to 

institutional cost increased by 13.3 percent. 

Additionally, FY 2017 represents the third 

year in a row that average unit attributable 

cost decreased. However, the decrease from 

FY 2016 to FY 2017 was smaller than the 

decrease from FY 2015 to FY 2016, 2.0 percent 

and 7.7 percent, respectively.

As shown in Figure III-3, the Competitive 

products’ share of total Postal Service revenue 

and attributable cost nearly tripled since FY 2007. 

Competitive products’ share of contribution to 

institutional cost has steadily increased from just 

5.2 percent in FY 2007 to 25.3 percent in FY 2017.

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference 

PRC-LR-ACR2016/1; Library Reference USPS-FY17-42.

Table III-3

Competitive Volume, Revenue, and Cost, FY 2017 and FY 2016

FY 2017 FY 2016 Varience

Volume (Millions) 5,103 4,499 13.4%

Revenue ($ Millions) 20,690 18,495 11.9%

Attributable Cost ($ Millions) 13,884 12,490 11.2%

Contribution to Institutional Cost 

($ Millions)

 6,806 6,005 13.3%

Figure III-3

Competitive Percentage Share of Total Postal Service Revenue, Cost,

and Contribution to Institutional Cost, FY 2007 – FY 2017

Source: Postal Service Cost and Revenue Analysis (CRA) Reports, FY 2007 - FY 2017.

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Percentage of Total

Fiscal Year

% of Total Revenue % of Total Attributable Cost % of Total Contribution

% of Total Revenue

% of Total 

Attributable Cost

% of Total 

Contribution
42 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Percentage of Total

Fiscal Year

% of Total Revenue % of Total Attributable Cost % of Total Contribution

Figure III-4

Competitive Average Unit Revenue and Cost, FY 2007 – FY 2017

Source: Postal Service CRA Reports, FY 2007 - FY 2017. 

Figure III-5

Competitive Contribution to Institutional Cost, FY 2007 – FY 2017

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LRACR2016/1; Docket No. ACR2015, Library Reference PRC-LR-ACR2015/1; Docket No. ACR2014, 

Library Reference PRC-LR-ACR2014/1; FY 2007- FY 2013 ACD; Library Reference PRC-LR-1.

 

Contribution to 

Institutional Cost 

Required 

Contribution to 

Institutional Cost 

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Percent Share

Fiscal Year

Contribution to Institutional Cost Required Contribution to Institutional Cost

 Average Revenue per Piece Average Attributable Cost per Piece

 Average Required Contribution per Piece

0

100

200

300

400

500

600

700

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Cents per Piece

Average Revenue per piece Average Attributable Cost per Piece Average Required Contribution per Piece

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Percentage of Total

Fiscal Year

% of Total Revenue % of Total Attributable Cost % of Total Contribution
CHAPTER III | 43

Market Dominant Volume, Revenue, 

and Cost Trends by Class

First-Class Mail

Five products are assigned to First-Class Mail: 

Single-Piece Letters/Postcards; Presorted 

Letters/Postcards; Flats; Outbound Single-Piece 

First-Class Mail International; and Inbound 

Letter Post. For comparison purposes in this 

report, the products are grouped into letters, 

flats, and “all other.”14

FIRST-CLASS MAIL LETTERS 

COMPARED WITH FY 2016

Table III-4 summarizes the FY 2017 change in total 

volume and revenue for First-Class Mail letters. 

First-Class Mail letters volume continued to decline 

in FY 2017. For single-piece letters, the rate of 

decline was 5.7 percent compared to 4.2 in FY 2016. 

Figure III-4 illustrates the changes in average 

unit revenue and cost from FY 2007 to FY 2017. 

Competitive products are required to collectively 

cover 5.5 percent of the Postal Service’s 

institutional costs.12 The minimum required 

contribution is shown in Figure III-4 as an average 

per piece basis. Since FY 2007, average unit 

revenue for Competitive products and services 

exceeded the combined average unit attributable 

cost and required contribution per piece.

The significant increase in Competitive product 

volume has resulted in total attributable cost for 

Competitive products increasing in every cost 

segment, more than doubling since FY 2007. Total 

contribution to institutional cost from Competitive 

products continues to increase, exceeding the 

required contribution to institutional cost.13 As 

shown in Figure III-5, Competitive products’ 

contribution has increased significantly in recent 

years. Nonetheless, the increase in FY 2017 is 

substantial compared to increases in past years.

Negative values denoted by ().

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1.

Table III-4

First-Class Mail Letters Volume and Revenue, FY 2017 and FY 2016

Mail Volume Mail Revenue

(Millions)

FY 2017

(Millions)

FY 2016

Increase or 

Decrease

Percent 

Change

($ in Millions)

FY 2017

($ in Millions)

FY 2016

Increase or 

Decrease

Percent 

Change

Single-Piece 17,832 18,910 (1,078) -5.7% 8,804 9,534 (730) -7.7%

Presorted 36,670 37,746 (1,076) -2.8% 14,054 14,889 (835) -5.6%

Total Letters 54,502 56,656 (2,154) -3.8% 22,857 24,423 (1,566) -6.4%

12 39 C.F.R. § 3015.7(c).

13 The Commission has proposed a formula-based approach to calculate the appropriate share of institutional cost to which Competitive products must 

contribute. Docket No. RM2017-1, Notice of Proposed Rulemaking to Evaluate the Institutional Cost Contribution Requirement for Competitive Products, February 8, 2018 (Order No. 4402). Under the proposed rules, the Postal Service’s Competitive products would have had to contribute 7.8 percent of institutional 

cost in FY 2017, less than the Postal Service contributed in FY 2017. Order No. 4402 at 33.

14 “All other” includes cards, Outbound Single-Piece First-Class Mail International, Inbound Letter Post, and Inbound International NSAs.
44 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

Presorted letters volume decreased 2.8 percent in 

FY 2017, compared to 0.7 percent in FY 2016.

Revenue for First-Class Mail dropped sharply in FY 

2017 due to elimination of the exigent surcharge, 

which decreased the price of stamps by 2 cents. 

This, coupled with lower volume resulted in a 7.7 

percent decrease in revenue from single-piece 

letters. The revenue for presorted letters was 

also negatively affected by the elimination of the 

surcharge, falling 5.6 percent from FY 2016.

Table III-5 summarizes the FY 2017 change in 

total attributable cost for First-Class Mail letters. 

Total attributable cost for First-Class Mail letters 

decreased by $3 million from FY 2016. However, 

due to the large drop in volume in FY 2017, unit 

attributable cost increased 5.9 percent. The 

overall increase in average unit attributable cost 

for First-Class Mail letters is in a large part due 

to the single-piece category, as the average unit 

attributable cost of the single-piece category 

increased by 6.0 percent from FY 2016. These 

changes are discussed in further detail in the 

following section.

TRENDS IN FIRST-CLASS MAIL LETTERS

Changes in the use of postal services continues 

to erode First-Class Mail letters volume as 

consumers switch to electronic channels for 

banking and payment of services.15 Figure III-6 

illustrates the rate of decline for First-Class Mail 

letters volume. In FY 2017, the rate of decline for 

single-piece letters increased compared with the 

previous three years, when the rate of decline 

remained consistently close to 4 percent.

The volume of First-Class Mail presorted letters 

has decreased every year since FY 2007. The rate 

of decline for First-Class Mail presorted letters 

volume increased to 5.7 percent, the highest rate 

of decline since FY 2012.

Figure III-7 shows the change in the average 

unit attributable cost for First-Class Mail letters. 

First-Class Mail single-piece letters average unit 

attributable cost has increased three of the last five 

years, increasing 0.7 percent in FY 2014, 4.7 percent 

in FY 2016, and 6.0 percent in FY 2017. The FY 

2017 increase in average unit attributable cost for 

First-Class Mail single-piece letters is the highest 

in a decade. This is due in part to the change in the 

definition of attributable cost. See supra at 1.

Negative values are denoted by ().

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1. 

 

Table III-5

First-Class Mail Letters Attributable Cost and Average Unit Attributable Cost, FY 2017 and FY 2016

Attributable Cost Unit Attributable Cost

($ in Millions) 

FY 2017

($ in Millions)

FY 2016

Increase or

Decrease

Percent

Change

(Cents 

per Piece)

FY 2017

(Cents 

per Piece)

FY 2016

Increase or

Decrease

Percent

Change

Single-Piece 5,318 5,322 (4) -0.1% 29.8 28.1 1.7 6.0%

Presorted 4,405 4,404 1 0.0% 12.0 11.7 0.3 2.9%

Total Letters 9,723 9,726 (3) 0.0% 17.8 16.8 1.0 5.9%

15 Postal Service FY 2017 Form 10-K at 19.
CHAPTER III | 45

Source: Postal Service Revenue, Pieces and Weight (RPW) Reports, FY 2008 - FY 2017.

 

Single-Piece

Presorted

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Percent Change

Fiscal Year

Single-Piece Presorted

Figure III-6

First-Class Mail Letters Percentage Change in Volume, FY 2008 – FY 2017

Figure III-7

First-Class Mail Letters Percentage Change in Average Unit Attributable Cost, FY 2009 – FY 2017

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1; Docket No. ACR2015,

Library Reference PRC-LR-ACR2015/1; Docket No. ACR2014, Library Reference PRC-LR-ACR2014/1; FY 2007- FY 2013 ACD; Library 

Reference PRC-LR-1.

Single-Piece Presorted

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

2009 2010 2011 2012 2013 2014 2015 2016 2017

Percentage Change

Fiscal Year

Single-Piece Presorted
46 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

There is no perceivable trend for First-Class Mail 

presorted letters average unit attributable cost. 

Unit attributable cost for First-Class Mail presorted 

letters increased in FY 2017, after a large decrease 

in FY 2016. However, it is notable that the increases 

and decreases for FY 2016 are atypical because in 

FY 2016 the Postal Service corrected an In-Office 

Cost System (IOCS) coding error that shifted costs 

from First-Class Mail presorted letters to First-Class 

Mail single-piece letters.16

Table III-6 compares the average unit VVPPS 

cost for presorted letters, by cost component 

or segment, for FY 2012 through FY 2017. Mail 

processing cost increased slightly in FY 2017, but 

remains significantly lower than in previous years. 

City carrier in-office unit costs for presorted 

letters decreased modestly FY 2017 (1.4 percent). 

The rate of decrease was lower than in FY 2016 

(4.5 percent). Both of these segments represent 

mail processing activities, as carrier in-office cost 

is largely comprised of time spent sorting mail 

for delivery. City carrier street unit cost remained 

unchanged from FY 2017. As the table shows, rural 

carrier unit cost increased by 7.2 percent, to the 

highest unit cost since FY 2012.

Table III-6

First-Class Mail Presorted Letters Average VVPPS Cost by Segment, FY 2012 – FY 2017

Cost 

Segment or 

Component

Unit Volume Variable 

plus Product Specific Cost

Changes in Volume Variable plus Product 

Specific Unit Cost

2017 2016 2016 2014 2013 2012 2017 2016 2015 2014 2013

Mail Processing 5.26 5.18 5.87 5.55 5.49 5.78 1.5% -11.8% 5.7% 1.2% -5.0%

City Carrier 

In-Office

 1.45 1.47 1.54 1.52 1.40 1.48 -1.4% -4.5% 1.4% 8.7% -5.6%

City Carrrier 

Street

 2.32 2.32 2.21 2.38 2.41 2.37 0.0% 5.2% -7.2% -1.6% 2.1%

Rural carriers 0.89 0.83 0.82 0.81 0.78 0.90 7.2% 0.7% 2.1% 4.1% -14.2%

Transportation 1.36 1.34 1.27 1.17 1.22 1.23 1.2% 6.1% 8.4% -4.3% -0.4%

All Other 0.57 0.53 0.58 0.58 0.59 0.64 7.5% -8.6% 0.0% -7.2% -14.4%

Source: The Postal Regulatory Commission derived from Postal Service Cost Segment and Component Reports, FY 2012 to FY 2017.

16 See USPS-FY16-37, December 29, 2016, at 1.
CHAPTER III | 47

FIRST-CLASS MAIL FLATS COMPARED WITH FY 2016

Table III-7 shows the total volume and revenue 

for First-Class Mail Flats. First-Class Mail singlepiece flats volume declined 10.0 percent in FY 

2017 compared to a 9.1 percent decline in FY 

2016. The 4.2 percent decrease in First-Class 

Mail presorted flats volume in FY 2017 was much 

larger than the 0.4 percent decrease in FY 2016.

Total First-Class Mail Flats revenue also declined 

compared to FY 2016. The decrease is partly 

due to decline in volume. The expiration of 

the exigent surcharge also contributed to the 

decrease in revenue in FY 2017.

Table III-8 summarizes the FY 2017 change 

in attributable cost. Total attributable cost 

for First-Class Mail Flats remained nearly 

unchanged from FY 2016. However, on a unit 

basis, costs increased 8.6 percent. The change 

in the definition of attributable cost accounts 

for just 0.2 percent of the increase. The average 

unit attributable cost for single-piece flats and 

presorted flats increased, by 9.7 percent and 8.3 

percent respectively.

Table III-7

First-Class Mail Flats Volume and Revenue, FY 2017 and FY 2016

Negative values denoted by ().

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1.

Mail Volume Mail Revenue

($ in Millions) 

FY 2017

($ in Millions) 

FY 2016

Increase or

Decrease

Percent

Change

($ in Millions) 

FY 2017

($ in Millions)

FY 2016

Increase or

Decrease

Percent

Change

Single-Piece 865 961 (96) -10.0% 1,405 1,575 (170) -10.8%

Presorted 583 609 (26) -4.2% 586 631 (45) -7.2%

Total Flats 1,448 1,570 (122) -7.8% 1,992 2,206 (215) -9.7%

Table III-8

First-Class Mail Flats Attributable Costs and Average Unit Attributable Cost, FY 2017 and FY 2016

Negative values are denoted by ().

Source: Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1.

Attributable Cost Unit Attributable Cost

($ in Millions) 

FY 2017

($ in Millions)

FY 2016

Increase or

Decrease

Percent

Change

(Cents 

per Piece)

FY 2017

(Cents 

per Piece)

FY 2016

Increase or

Decrease

Percent

Change

Single-Piece 1,084 1,098 (14) -1.3% 125.4 114.3 11.1 9.7%

Presorted 449 433 16 3.7% 76.9 71.0 5.9 8.3%

Total Flats 1,533 1,531 2 0.1% 105.8 97.5 8.4 8.6%
48 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

TRENDS IN FIRST-CLASS MAIL FLATS

First-Class Mail Flats volume has been declining 

for years. Figure III-8 compares the percentage 

change in First-Class Mail Flats volume from FY 

2008 to FY 2017. Since FY 2007, First-Class Mail 

Flats volume decreased by 63.5 percent. Singlepiece flats volume continues its downward trend. 

Although both presorted flats and single-piece 

flats lost volume since FY 2008, most of the 

First-Class Mail Flats volume loss occurred in 

First-Class Mail single-piece flats. Since FY 2007, 

single-piece flats have decreased 72.5 percent, 

compared to a 28.7 percent volume decrease for 

presorted flats. 

17 In addition to the direct costs, there are other “indirect” costs associated with the direct costs component or cost segment. Some examples of these indirect 

costs are Cost Segment 3 Administrative Clerks, Cost Segment 12 Vehicle Service Costs, Cost Segment 15 Rents and Fuel and Utilities, and Cost Segment 18 

Service-wide Labor Costs (such as, workers’ compensation, etc.). These “indirect” costs are referred to as “piggybacked” costs and are developed in Library 

Reference USPS-FY15-24. The unit attributable cost by cost segment or component presented in this report are “piggybacked” costs, unless stated otherwise.

Figure III-8

Percentage Change in First-Class Mail Flats Volume, FY 2008 – FY 2017

Source: Source: Postal Service RPW Reports, FY 2008 - FY 2017.

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Percent Change

Fiscal Year

Single-Piece Presorted

Single-Piece

Presorted

Figure III-9 compares the average unit attributable 

cost for First-Class Mail single-piece and presorted 

flats since FY 2008. The average unit attributable 

cost for First-Class Mail single-piece flats has 

increased for the fourth year in a row. For the last 

two years, the average unit attributable cost for 

First-Class Mail single-piece flats was relatively high 

compared with previous years. Conversely, for FirstClass Mail presorted flats, average unit attributable 

cost was relatively low in the last two years.

Table III-9 compares the average VVPPS unit cost 

by cost segment or component of First-Class Mail 

single-piece and presorted flats for FY 2016 and 

FY 2017. VVPPS cost includes all of the indirect 

cost that is piggybacked to the direct cost.17

In FY 2017, average VVPPS unit cost for FirstClass Mail single-piece flats exceeded the average 

VVPPS unit cost for First-Class Mail presorted 

flats in all cost segments. Compared to FY 2016, 

the average VVPPS unit cost for First-Class Mail 

single-piece flats increased in all cost segments. 

For First-Class Mail presorted flats, only the 

average VVPPS unit cost for city carrier in-office 

decreased in FY 2017.
CHAPTER III | 49

Figure III-9

First-Class Mail Flats Average Unit Attributable Cost, FY 2008 – FY 2017

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1; Docket No. ACR2015, Library 

Reference PRC-LR-ACR2015/1;Docket No. ACR2014, Library Reference PRC-LR-ACR2014/1; FY 2007 - FY 2013 ACD; Library Reference 

PRC-LR-1.

0

20

40

60

80

100

120

140

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Cents per Piece

Fiscal Year

 Single-Piece Presorted

Single-Piece

Presorted

Table III-9

First-Class Mail Flats Average VVPPS Unit Cost by Segment or Component, FY 2016 and FY 2017

Source: The Postal Regulatory Commission derived from Postal Service Cost Segment and Component Reports, FY 2016 and FY 2017.

Cost Segment or Component

2016 2017

Single-Piece Presort Diff. Single-Piece Presort Diff.

Mail Processing 63.1 38.5 24.6 71.3 42.0 29.3 

City Carrier In-Office 11.3 12.5 (1.1) 12.7 12.1 0.6 

City Carrrier Street 7.6 4.2 3.3 7.9 4.2 3.7 

Rural carriers 3.7 2.7 1.0 4.2 3.0 1.2 

Transportation 18.8 10.3 8.5 19.4 12.3 7.1 

All Other 9.6 2.8 6.8 9.9 2.7 7.2 

Total 114.3 71.0 43.3 125.4 76.4 49.0 
50 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

OTHER FIRST-CLASS MAIL COMPARED WITH FY 2016

Table III-10 shows the volume and revenue for 

First-Class Mail “all other.” The volume of Cards 

and Outbound Single-Piece First-Class Mail 

International each decreased in FY 2017. Conversely, 

Inbound Letter Post volume and Inbound 

International NSAs volume increased from FY 2016. 

Changes in revenue followed the same pattern.

Table III-11 presents the changes in total 

attributable cost and average unit attributable cost 

for “all other” First-Class Mail between FY 2016 

and FY 2017. On a unit basis, only the attributable 

cost of First-Class Mail cards decreased from FY 

2016, albeit minimally. The unit attributable cost 

for both inbound international products increased 

by approximately 12 percent. Due to the small 

volume of “all other,” less than 1.0 percent of

the total volume of First-Class Mail, its impact 

on the average unit attributable cost for the class 

is minimal.

Table III-10

All Other First-Class Mail Volume and Revenue, FY 2017 and FY 2016

Negative values are denoted by ().

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1.

Mail Volume Mail Revenue

(Millions) 

FY 2017

(Millions)

FY 2016

Increase 

or

Decrease

Percent

Change

($ in 

Millions) 

FY 2017

($ in 

Millions)

FY 2016

Increase 

or

Decrease

Percent

Change

Total Cards 2,796 2,993 (196) -6.6% 787 865 (78) -9.0%

Outbound Single-Piece FirstClass Mail International 152 172 (20) -11.5% 231 262 (30) -11.6%

Inbound Letter Post 401 392 9 2.2% 293 266 26 9.9%

Inbound International NSAs 243 214 29 13.8% 414 324 91 28.0%

Total Other First-Class Mail 3,592 3,770 (178) -4.7% 1,726 1,717 9 0.5%

Table III-11

Other First-Class Mail Attributable Cost and Average Unit Attributable Cost, FY 2017 and FY 2016

Negative values are denoted by ().

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1. 

Attributable Cost Unit Attributable Cost

($ in 

Millions) 

FY 2017

($ in 

Millions)

FY 2016

Increase 

or

Decrease

Percent

Change

($ in 

Millions) 

FY 2017

($ in 

Millions)

FY 2016

Increase 

or

Decrease

Percent

Change

Total Cards 374 405 (31) -7.7% 13.4 13.5 (0) -1.2%

Outbound Single-Piece FirstClass Mail International 139 153 (13) -8.8% 91.6 88.9 2.7 3.1%

Inbound Letter Post 463 401 62 15.5% 115.6 102.3 13.2 12.9%

Inbound International NSAs 278 218 60 27.8% 114.5 102.0 12.5 12.3%

Total Other First-Class Mail 1,254 1,176 78 6.6% 34.9 31.2 3.7 11.9%
CHAPTER III | 51

Marketing Mail

Marketing Mail is comprised of seven products: 

Letters, Flats, Parcels, Carrier Route, High Density 

and Saturation Letters, High Density and Saturation 

Flats/Parcels, and Every Door Direct Mail-Retail 

(EDDM-R). For comparison purposes, the products 

have been grouped into letters and flats.18

MARKETING MAIL LETTERS 

COMPARED WITH FY 2016

Table III-12 summarizes the FY 2017 change in 

volume and revenue of letter-shaped Marketing 

Mail. High Density and Saturation Letters volume 

increased modestly, compared to FY 2016. 

Revenue for this product also increased compared 

with FY 2016, even though revenue in FY 2016 

included exigent surcharge revenue collected 

through April 10, 2016. For Marketing Mail Letters 

both volume and revenue decreased in FY 2017, 

3.9 percent and 5.5 percent, respectively.

Table III-13 summarizes the FY 2017 change 

in attributable cost. Despite an increase in the 

attributable cost of High Density and Saturation 

Letters, total attributable cost for letter-shaped 

Marketing Mail decreased 1.6 percent in FY 2017. 

The average unit attributable cost increased for 

both categories.

Table III-12

Marketing Mail Letters Volume and Revenue, FY 2017 and FY 2016

Mail Volume Mail Revenue

(Millions) 

FY 2017

(Millions)

FY 2016

Increase 

or

Decrease

Percent

Change

($ in 

Millions) 

FY 2017

($ in 

Millions)

FY 2016

Increase 

or

Decrease

Percent

Change

Letters 46,973 48,859 (1,886) -3.9% 9,600 10,163 (563) -5.5%

High Density 

& Saturation Letters

 7,094 6,992 102 1.5% 1,093 1,079 14 1.3%

Total Letters 54,067 55,851 (1,784) -3.2% 10,693 11,242 (550) -4.9%

Negative values are denoted by ().

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1. 

 

Table III-13

Marketing Mail Letters Attributable Costs and Average Unit Attributable Costs, FY 2017 and FY 2016

Attributable Cost Unit Attributable Cost

($ in 

Millions) 

FY 2017

($ in 

Millions)

FY 2016

Increase 

or

Decrease

Percent

Change

(Cents 

per Piece) 

FY 2017

(Cents 

per Piece)

FY 2016

Increase 

or

Decrease

Percent

Change

Letters 4,912 5,023 (111) -2.2% 10.5 10.3 0.2 1.7%

High Density 

& Saturation Letters

 515 492 23 4.6% 7.3 7.0 0.2 3.1%

Total Letters 5,427 5,516 (88) -1.6% 10.0 9.9 0.2 1.6%

Negative values are denoted by ().

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1.

18 The majority of the former Standard Mail Parcels product was moved to the Competitive product list, and the remaining parcel volume comprises only 0.1 

percent of total Marketing Mail volume. Consequently, that volume is not discussed separately. See Docket No. MC2010-36, Order Conditionally Granting 

Request to Transfer Commercial Standard Mail Parcels to the Competitive Product List, March 2, 2011 (Order No. 689).
52 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

Figure III-10

Marketing Mail Letters Volume Percent Change, FY 2008 – FY 2017

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1; Docket No. ACR2015, Library 

Reference PRC-LR-ACR2015/1; Docket No. ACR2014, Library Reference PRC-LR-ACR2014/1; FY 2007- FY 2013 ACD; Library Reference 

PRC-LR-1.

High Density 

& Saturation 

Letters

Letters

-20%

-15%

-10%

-5%

0%

5%

10%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Percent Change

Fiscal Year

High Density & Saturation Letters Letters

Figure III-11

Marketing Mail Letters Average Unit Attributable Cost, FY 2009 – FY 2017

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1; Docket No. ACR2015, Library 

Reference PRC-LR-ACR2015/1; Docket No. ACR2014, Library Reference PRC-LR-ACR2014/1; FY 2009 - FY 2013 ACD; Library Reference 

PRC-LR-1.

High Density 

& Saturation 

Letters

Letters

0.00

2.00

4.00

6.00

8.00

10.00

12.00

2009 2010 2011 2012 2013 2014 2015 2016 2017

Cents per Piece

Fiscal Year

High Density & Saturation Letters Letters
CHAPTER III | 53

TRENDS IN MARKETING MAIL LETTERS

As shown in Figure III-10, Marketing Mail Letters 

volume decreased in FY 2017, after a sizable 

increase in FY 2016. The decrease in volume is 

the largest decrease since FY 2012. High Density 

and Saturation Letters volume increased every 

year since FY 2012, with the increase in FY 2017 

being the smallest from FY 2012 to FY 2017.

As shown in Figure III-11, the average unit 

attributable cost for Marketing Mail Letters has 

remained relatively stable since FY 2009. Since 

FY 2010, annual unit attributable cost changes 

were less than 0.5 cents. FY 2017 average unit 

attributable cost for High Density and Saturation 

Letters increased every year since FY 2012.

19 Some products include parcels, however those products contain predominantly flat-shaped mailpieces. 

20 Similar price categories were also introduced for flat-shaped Bound Printed Matter (BPM) and Periodicals. Docket No. R2015-4, Order on Revised Price 

Adjustments for Standard Mail, Periodicals, and Package Services Products and Related Mail Classification Changes, May 7, 2015 (Order No. 2472)

MARKETING MAIL FLATS COMPARED WITH FY 2016

Table III-14 summarizes the FY 2017 changes in 

volume and revenue for flat-shaped Marketing 

Mail.19 Volume declined for Flats and EDDM-R 

and increased for High Density and Saturation 

Flats/Parcels and Carrier Route flats. The largest 

changes from FY 2016 were for Flats and Carrier 

Route flats due to a change in pricing structure.

On May 31, 2015, the Postal Service introduced 

new price categories for Marketing Mail Flats 

pieces destined for Flats Sequencing System 

(FSS) zones.20 The Postal Service intended to 

provide pricing signals that better reflected the 

mail processing costs of FSS preparation. For 

Marketing Mail, the new FSS rates were developed 

by blending Carrier Route prices and presorted 

5-Digit/3-Digit prices, using the proportion of FSS 

volumes mailed in each price category.

In Docket No. R2017-1, the Postal Service sought 

to reverse the changes to the pricing structure of 

flat-shaped mail due to unintended consequences 

affecting certain categories. Many mailers who 

previously paid Carrier Route rates for their 

FSS volume experienced an above-average price 

increase after the new rates were implemented 

on May 31, 2015.

Table III-14

Marketing Mail Flat Volume and Revenue, FY 2017 and FY 2016

Negative values denoted by ().

Source: Library Reference PRC-LR-ACR2017/1;Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1.

Mail Volume Mail Revenue

(Millions) 

FY 2017

(Millions)

FY 2016

Increase 

or

Decrease

Percent

Change

($ in 

Millions) 

FY 2017

($ in 

Millions)

FY 2016

Increase 

or

Decrease

Percent

Change

High Density & Saturation 

Flats/Parcels

 11,252 11,101 151 1.4% 1,989 2,021 (32) -1.6%

Carrier Route 7,297 6,783 514 7.6% 1,903 1,831 72 3.9%

Flats 4,955 6,340 (1,386) -21.9% 1,906 2,380 (475) -20.0%

Every Door Direct 

Mail - Retail

 758 810 (52) -6.4% 134 146 (12) -8.0%

Total 24,262 25,034 (772) -3.1% 5,932 6,378 (446) -7.0%
54 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

The Postal Service explained that after the 

change in price structure, “FSS volume declined 

more quickly than the volume in other categories 

of flat-shaped mail.” The Commission approved a 

Market Dominant price adjustment that reversed 

the change in pricing structure.21

The FY 2016 volume data for Marketing Mail flats 

showed a large decrease in Carrier Route flats 

volume and a large increase in Marketing Mail 

Flats volume. By returning to the original pricing 

structure, substantial Flats volume migrated 

back to Carrier Route flats.

The 21.9 percent decrease in Flats volume 

resulted in a 20.0 percent decrease in revenue. 

Carrier Route revenue increased in FY 2017, 

but only by a fraction of the decrease in Flats 

revenue. Total revenue for flat-shaped Marketing 

Mail decreased in FY 2017, due to both the shift 

in volume and the expiration of the exigent 

surcharge in FY 2016. The loss of volume also 

contributed to the reduction of revenue.

Total attributable cost for flat-shaped Marketing 

Mail decreased slightly in FY 2017, despite an 

increase in the attributable cost for High Density 

and Saturation Flats/Parcels, and Carrier Route. 

Average unit attributable cost for flats remained 

nearly unchanged from FY 2016, mostly due to 

the large decrease in the volume of Flats, which 

have the highest unit attributable cost of all flatshaped Marketing Mail products.

TRENDS IN MARKETING MAIL FLATS

Total volume for flat-shaped Marketing Mail 

continued to decline in FY 2017, decreasing by 

nearly 30 percent since FY 2009. As shown in 

Figure III-12, volume changes for Marketing Mail 

Flats and Carrier Route flats in FY 2016 and 

FY 2017 are substantially larger than previous 

volume changes for these categories. As previously 

discussed, changes to the pricing structure were 

responsible for volume moving from Carrier Route 

to Flats and back again. Since FY 2012, volume 

changes for High Density and Saturation Flats/

Parcels remained relatively small. 

21 Docket No. R2017-1, Order on Price Adjustments for First-Class Mail, Standard Mail, Periodicals, and Package Services Products and Related Mail 

Classification Changes, November 15, 2016 (Order No. 3610).

Table III-15

Marketing Mail Flats Attributable Costs and Average Unit Attributable Cost, FY 2017 and FY 2016

Negative values are denoted by ().

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1.

Attributable Cost Unit Attributable Cost

($ in 

Millions) 

FY 2017

($ in 

Millions)

FY 2016

Increase 

or

Decrease

Percent

Change

(Cents 

per Piece) 

FY 2017

(Cents 

per Piece)

FY 2016

Increase 

or

Decrease

Percent

Change

High Density & Saturation 

Flats/Parcels

 1,263 1,197 66 5.5% 11.2 10.8 0.4 4.1%

Carrier Route 1,531 1,331 200 15.0% 21.0 19.6 1.4 6.9%

Flats 2,574 2,985 (410) -13.7% 52.0 47.1 4.9 10.4%

Every Door Direct Mail - 

Retail

 50 54 (4) -7.5% 6.6 6.7 (0.1) -1.1%

Total 5,418 5,567 (149) -2.7% 22.3 22.2 0.1 0.4%
CHAPTER III | 55

Figure III-12

Marketing Mail Flats Percent Change in Volume, FY 2010 – FY 2017

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1; Docket No. ACR2015, Library 

Reference PRC-LR-ACR2015/1; Docket No. ACR2014, Library Reference PRC-LR-ACR2014/1; FY 2009- FY 2013 ACD; Library Reference PRC-LR-1.

-30.0%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2010 2011 2012 2013 2014 2015 2016 2017

Percent Change

Fiscal Year

Standard High Density & Saturation Flats Carrier Route

 Standard High Density & Saturation Flats Carrier Route

Figure III-13

Marketing Mail Flats Percent Change in VVPPS Cost, FY 2009 – FY 2017

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1; Docket No. ACR2015, Library 

Reference PRC-LR-ACR2015/1; Docket No. ACR2014, Library Reference PRC-LR-ACR2014/1; FY 2008- FY 2013 ACD; Library Reference PRC-LR-1.

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

2009 2010 2011 2012 2013 2014 2015 2016 2017

Percent Change

Fiscal Year

High Density & Saturation Carrier Route Flats EDDM

 High Density 

 & Saturation 

 Carrier Route 

 Flats 

 EDDM 
56 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

The average unit attributable cost of each flatshaped Marketing Mail product has increased 

significantly over the last nine years. The annual 

changes in average unit attributable cost are 

illustrated in Figure III-13. Since FY 2008, the 

average unit attributable cost has increased 

33.7 percent for Flats, 39.6 percent for Carrier 

Route, and 80.5 percent for High Density and 

Saturation Flats.

Table III-16 compares the change in the average 

unit VVPPS cost by cost segment or component 

between FY 2016 and FY 2017. Mail processing 

unit cost increased for all Marketing Mail flats 

except for EDDM-R. EDDM-R unit costs tend to 

vary significantly from year to year, most likely 

due to the few IOCS tallies for this low-volume 

category of Marketing Mail that requires very 

little in-office handling. City carrier in-office 

unit costs increased for all categories of flatshaped Marketing Mail except High Density and 

Saturation Flats/Parcels. For High Density and 

Saturation Flats/Parcels, Flats, and EDDM the 

city carrier street unit cost increased, while the 

rural carrier unit cost decreased. Carrier Route 

flats exhibited the opposite of this pattern.

Source: The Postal Regulatory Commission derived from Library Reference USPS-FY17-24; Docket No. ACR2016, Library Reference USPSFY16-24.

High Density 

& Saturation Carrier Route Flats EDDM

Mail Processing

FY 2017 1.2797 6.2086 27.8954 0.0718 

FY 2016 1.2011 5.0007 25.7396 0.1251 

% Change 6.5% 24.2% 8.4% -42.6%

City Carrier In-Office

FY 2017 1.2983 5.6614 10.8220 1.2623 

FY 2016 1.1343 5.5438 8.8783 1.1001 

% Change -12.6% 2.1% 21.9% 14.7%

City Carrier Street

FY 2017 4.7631 4.0644 5.5164 4.2718 

FY 2016 4.9163 3.3338 6.0793 4.4585 

% Change 3.2% -18.0% 10.2% 4.4%

Rural Carriers

FY 2017 3.1156 3.5998 2.9040 0.5043 

FY 2016 2.8599 4.0477 2.3563 0.4720 

% Change -8.2% 12.4% -18.9% -6.4%

Table III-16

Change in Standard Flat-Shaped Mail Average Unit VVPPS Cost by Cost Segment, 

FY 2017 and FY 2016
CHAPTER III | 57

Periodicals

The Periodicals class is comprised of two 

products: In-County and Outside County. InCounty is typically used by newspapers with 

smaller weekly circulations for distribution within 

the county of publication. Outside County consists 

of publications with a wide variety of circulation 

sizes, distribution patterns, and frequencies.

PERIODICALS COMPARED WITH FY 2016

Table III-17 summarizes the FY 2017 changes in 

volume and revenue for Periodicals. In FY 2017, 

Periodicals volume declined by 285 million pieces, 

or 5.1 percent, with most of the decrease occurring 

in Outside County publications. In FY 2017, the rate 

of decrease in volume exceeded that of FY 2016. 

As with Marketing Mail Flats, the change in the 

rate structure introduced May 31, 2015, and its 

reversal, may have impacted the volume of mail in 

the two Periodicals categories. In FY 2016, Outside 

County volume dropped by a greater percentage 

than In-County; in FY 2017, it was the reverse. Total 

revenue for Periodicals declined 8.8 percent in FY 

2017. The loss in revenue is due to volume losses, as 

well as the decrease in prices due to the expiration 

of the exigent surcharge.

Table III-18 compares Periodicals total 

attributable cost and average unit attributable 

cost for FY 2016 and FY 2017. Total Periodicals 

attributable cost decreased by $54 million, or 2.6 

percent. Most of the decrease occurred in Outside 

County; In-County cost decreased by the same 

percentage from FY 2016 as Outside County but its 

volume was significantly lower. The average unit 

attributable cost for In-County and Outside County 

grew 0.6 percent and 2.8 percent, respectively.

Table III-17

Periodicals Volume and Revenue, FY 2017 and FY 2016

Mail Volume Mail Revenue

(Millions) 

FY 2017

(Millions)

FY 2016

Increase 

or

Decrease

Percent

Change

($ in 

Millions) 

FY 2017

($ in 

Millions)

FY 2016

Increase 

or

Decrease

Percent

Change

In-County 516 534 (18) -3.3% 58 62 (4) -6.0%

Outside County 4,784 5,052 (268) -5.3% 1,317 1,445 (128) -8.9%

Total 5,301 5,586 (285) -5.1% 1,375 1,507 (132) -8.8%

Negative values are denoted by ().

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1. 

Table III-18

Periodicals Attributable and Average Unit Attributable Cost, FY 2017 and FY 2016

Attributable Cost Unit Attributable Cost

($ in 

Millions) 

FY 2017

($ in 

Millions)

FY 2016

Increase 

or

Decrease

Percent

Change

(Cents 

per Piece) 

FY 2017

(Cents 

per Piece)

FY 2016

Increase 

or

Decrease

Percent

Change

In-County 85 87 (2) -2.7% 16.4 16.3 0.1 0.6%

Outside County 1,898 1,950 (52) -2.7% 39.7 38.6 1.1 2.8%

Total 1,983 2,037 (54) -2.6% 37.4 36.5 0.9 2.6%

Negative values are denoted by ().

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1.
58 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

TRENDS IN PERIODICALS

As shown in Figure III-14, Periodicals volume 

has continued to decline, in large part due to 

the availability of electronic alternatives. The 

decline in FY 2017 is similar to the declines seen 

in recent years.

The percentage change in the average unit 

attributable cost for In-County and Outside 

County Periodicals is shown in Figure III-15. 

Both In-County and Outside County average 

unit attributable cost increased during each of 

the past four fiscal years. With the exception of 

FY 2013, the average unit attributable cost for 

Outside County has increased each year since FY 

2008. The changes in average unit attributable 

cost of In-County Periodicals have been more 

erratic from FY 2008 to FY 2017.

Table III-19 disaggregates the average unit 

attributable cost of Outside County Periodicals 

for FY 2015 to FY 2017. As shown in the table, the 

average unit city carrier in-office cost increased 

substantially in FY 2017. Unit transportation 

cost decreased 23.2 percent after an 8.0 percent 

increase the year before, primarily due to a 

reduction in highway transportation cost.

Figure III-14

Periodicals Percent Change in Volume, FY 2008 – FY 2017

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1; Docket No. ACR2015, 

Library Reference PRC-LR-ACR2015/1; Docket No. ACR2014, Library Reference PRC-LR-ACR2014/1; FY 2007-FY 2013 ACD; Library 

Reference PRC-LR-1. 

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Percent Change

Fiscal Year

In-County County Outside County

In-County

Outside 

County
CHAPTER III | 59

Figure III-15

Periodicals Percent Change in Average Unit Attributable Cost, FY 2008 – FY 2017

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1; Docket No. ACR2015, 

Library Reference PRC-LR-ACR2015/1; Docket No. ACR2014, Library Reference PRC-LR-ACR2014/1; FY 2007- FY 2013 ACD; Library 

Reference PRC-LR-1.

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Percent Change

Fiscal Year

In-County Outside County

In-County

Outside 

County

Source: The Postal Regulatory Commission derived from Postal Service Cost Segment and Component Reports, 

FY 2015 to FY 2017.

Table III-19

Outside County Periodicals Average Unit VVPPS Cost by Segment, FY 2015 – FY 2017

Average Unit Attributable Cost Change in Average Unit 

Attributable Cost 

Cost Segment 2015 2016 2017 2016 2017

Mail Processing 18.89 19.09 20.19 1.1% 5.8%

City Carrier In-Office 6.30 6.14 6.76 -2.5% 10.1%

City Carrrier Street 3.78 4.09 4.10 8.2% 0.2%

Rural Carriers 3.35 3.36 3.55 0.3% 5.7%

Transportation 4.31 4.65 3.57 8.0% -23.2%

All Other 1.43 1.28 1.40 -10.5% 9.4%
60 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

Package Services

The Package Services class consists of four 

products: Alaska Bypass Service; Bound Printed 

Matter (BPM) Flats; Bound Printed Matter (BPM) 

Parcels; and Media Mail/Library Mail.

Table III-20 summarizes the FY 2017 changes 

in volume and revenue for Package Services. 

Overall, Package Services volume increased 4.9 

percent in FY 2017. With the exception of BPM 

Flats, volumes of Package Service products were 

higher compared with FY 2016. The volume of 

BPM Flats remained unchanged.

Of the four Package Service products, only BPM 

Flats revenue declined compared with FY 2016. 

The revenue increases for the other products 

were small, with BPM Parcels increasing the 

most at 3.1 percent.

As shown in Table III-21, attributable cost for 

Package Services decreased for all but one 

category compared with FY 2016. For FY 2017, 

BPM Flats attributable cost increased 1.5 

percent, and 1.7 percent on a unit basis. The 

attributable cost of BPM Parcels and Media Mail/

Library Mail decreased relatively modestly, 

however due to the growth in volume, on a unit 

basis the decreases were more sizable, 12.1 

percent and 2.4 percent, respectively. Alaska 

Bypass Service cost, which consists entirely of 

Cost Segment 14 transportation, decreased 11.6 

percent in the aggregate and 13.2 percent on a 

unit basis.

Table III-22 shows the FY 2017 percent change 

in VVPPS unit cost for selected cost segments. 

As shown in the table, BPM Flats unit costs 

increased for mail processing activities including 

city carrier in-office cost and rural carrier 

delivery cost. The largest percentage decrease 

in VVPPS unit cost was in transportation, with 

vehicle service driver costs a close second. In 

total, VVPPS unit costs for BPM Flats increased 

by 1.7 percent.

The unit cost for BPM Parcels decreased 

by 2.3 percent in FY 2017. For this product, 

transportation VVPPS unit cost decreased 30.6 

percent, the largest decrease of any segment. 

Conversely, VVPPS unit costs for delivery 

activities increased, as did city carrier in-office 

cost and vehicle service driver cost. The overall 

unit cost of Media Mail/Library Mail decreased 

slightly in FY 2017, with sizeable VVPPS unit 

cost decreases in city carrier in-office cost, 

transportation cost and rural carrier delivery 

cost offsetting the large increases in other 

segments and components.

Table III-20

Package Services Volume and Revenue, FY 2017 and FY 2016

Mail Volume Mail Revenue

(Millions) 

FY 2017

(Millions)

FY 2016

Increase 

or

Decrease

Percent

Change

($ in 

Millions) 

FY 2017

($ in 

Millions)

FY 2016

Increase 

or

Decrease

Percent

Change

Alaska Bypass 1 1 0 1.8% 34 34 0 0.5%

Bound Printed Matter Flats 264 265 (0) -0.2% 202 210 (8) -3.8%

Bound Printed Matter Parcels 278 250 28 11.1% 299 290 9 3.1%

Media Mail/Library Mail 76 75 1 2.0% 267 267 1 0.2%

Total 620 591 29 4.9% 801 799 2 0.2%

Negative values are denoted by ().

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1.
CHAPTER III | 61

Table III-21

Package Services Attributable Costs and Average Unit Attributable Cost, FY 2017 and FY 2016

Attributable Cost Unit Attributable Cost

($ in 

Millions) 

FY 2017

($ in 

Millions)

FY 2016

Increase 

or

Decrease

Percent

Change

(Cents 

per Piece) 

FY 2017

(Cents 

per Piece)

FY 2016

Increase 

or

Decrease

Percent

Change

Alaska Bypass 17 20 (2) -11.6% 1,334.7 1,537.7 (203.0) -13.2%

Bound Printed Matter Flats 133 131 2 1.5% 50.1 49.3 0.8 1.7%

Bound Printed Matter Parcels 270 277 (7) -2.4% 97.4 110.8 (13.4) -12.1%

Media/Library Mail 353 354 (2) -0.5% 461.1 472.5 (11.4) -2.4%

Total 774 781 (8) -1.0% 124.8 132.2 (7.4) -5.6%

Negative values are denoted by ().

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1.

Source: The Postal Regulatory Commission derived from Library Reference USPS-FY17-31; Docket No. ACR2016, Library 

Reference USPS-FY16-31.

BPM Flats BPM Parcels Media Mail/ Library Mail

Mail Processing 3.0% -13.8% 4.2%

City Carrier In-Office 19.3% 14.2% -35.9%

City Carrier Street -1.9% 38.3% 24.2%

Vehicle Service Driv. -11.8% -22.6% 14.5%

Rural Carriers 6.3% 3.3% -3.0%

Motor Vehicle Service -1.6% 19.3% 12.8%

Transportation -12.6% -30.6% -19.4%

All Other -49.1% 25.9% -1.0%

Total Volume Variable plus Product Specific Cost 1.7% -2.3% -2.6%

Table III-22

Package Services Percent Change in Average Unit VVPPS Cost by Segment and Component, 

FY 2017
62 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

Market Dominant Special Services

The Special Services class consists of 11 products: 

8 domestic products and 3 international products. 

Three Special Services products, Ancillary 

Services,22 Address Management Services, and 

International Ancillary Services include a number 

of distinctive services.

Special Services include Certified Mail, Insurance, 

Money Orders, Post Office Box, and other services 

that enhance Market Dominant products. As 

shown in Table III-23, total revenue for Special 

Services declined $36 million in FY 2017. With 

the exception of COD and Stamped Envelopes and 

Cards, revenue decreased for all special services.

Table III-24, shows that attributable cost for 

Special Services increased $122 million in FY 

2017, following a $42 million increase in FY 2016. 

The increase in attributable cost is primarily due 

to increases in attributable cost for Money Orders 

and Certified Mail service of $40 million and $38 

million, respectively.

Negative values are denoted by ().

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1.

Revenue

($ in 

Millions) 

FY 2017

($ in 

Millions)

FY 2016

Increase or

Decrease

Percent

Change

Certified Mail 667 670 (4) -0.6%

COD 4 2 2 105.5%

Insurance 74 77 (2) -3.2%

Registered Mail 30 32 (1) -4.0%

Stamped Envelopes & Cards 13 10 3 35.4%

Other Ancillary Services 434 447 (14) -3.0%

Money Orders 152 157 (4) -2.8%

Post Office Box 279 284 (5) -1.9%

Other Services 165 175 (11) -6.1%

Total Services 1,818 1,854 (36) -1.9%

Table III-23

Market Dominant Ancillary Services and Special Services Revenue, FY 2017 and FY 2016

22 One category included in Ancillary Services is “Other Ancillary Services” which consists of USPS Tracking, Return Receipts, Restricted Delivery, Signature 

Confirmation, Bulk Parcel Return Service, and Special Handling.
CHAPTER III | 63

Competitive Volume, Revenue, and Cost by Product

Competitive products consist of both domestic 

and international products. Domestic 

Competitive products include Priority Mail 

Express; Priority Mail; Parcel Select; Parcel 

Return Service; First-Class Package Service; 

Retail Ground; Address Enhancement Services; 

Greeting Cards, Gift Cards and Stationery; 

Competitive Ancillary Services; Premium 

Forwarding Service; Post Office Box Service; and 

Shipping and Mailing Supplies. There was also a 

total of 846 Domestic Competitive NSA products 

in effect during FY 2017.

International Competitive products include 

Outbound International Expedited Services; 

Outbound Priority Mail International; Inbound 

Air Parcel Post (at UPU rates); Outbound SinglePiece First-Class Package International Service; 

International Surface Air Lift; International Priority 

Airmail; International Direct Sacks – M-Bags; 

International Money Transfer Service – Outbound; 

International Money Transfer Service – Inbound; 

and International Ancillary Services. In FY 2017, 

there were also 718 International Outbound NSAs 

and 12 International Inbound NSAs.

Negative values are denoted by (). 

Source: The Postal Regulatory Commission derived from Library Reference USPS-FY17-31; Docket No. ACR2016, Library 

Reference USPS-FY16-31.

Attributable Cost ($ in Millions)

FY 2017 FY 2016 Increase or

Decrease

Percent

Change

Certified Mail 559 521 38 7.2%

COD 3 5 (2) -47.0%

Insurance 47 43 4 9.5%

Registered Mail 22 16 6 34.6%

Stamped Envelopes & Cards 8 10 (2) -15.5%

Other Ancillary Services 219 207 12 5.8%

Money Orders 156 117 40 34.0%

Post Office Box 231 230 1 0.5%

Other Services 79 77 2 2.4%

Total Services 1,347 1,225 122 9.9%

Table III-24

Market Dominant Ancillary Services and Special Services Attributable Cost, FY 2017 and FY 2016
64 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

Table III-26 summarizes the FY 2017 changes 

in attributable cost. Total attributable cost for 

Competitive products increased 11.2 percent, 

or approximately $1.4 billion, in FY 2017. The 

primary reason for the increase in attributable 

cost is volume growth. Costs were higher in 

nearly all cost segments and components. The 

largest increases in attributable costs were in 

ground parcels and First-Class Package Service. 

The average unit attributable cost increased 

for every category except for ground parcels. 

However, with ground parcels comprising 56.5 

percent of total Competitive volume, the average 

unit attributable cost of Competitive products as 

a whole decreased by 2.0 percent.

To facilitate comparison, the products have 

been grouped into several broad categories. 

Table III-25 summarizes the FY 2017 changes in 

volume and revenue for Competitive products 

and services. Total volume for Competitive 

products increased 13.4 percent in FY 2017, as 

every category except Priority Mail Express 

and Competitive International Mail experienced 

volume growth. The products with the largest 

increases in volume were First-Class Package 

Service, which increased 23.6 percent, and 

ground parcels,23 which increased 17.3 percent. 

The increase in First-Class Package Service is 

due in part to the transfer of single-piece retail 

parcels from the Market Dominant product list 

to the First-Class Package Service product on the 

Competitive product list.24

Total Competitive product revenue increased 

11.9 percent, or $2.2 billion, in FY 2017. Revenue 

for every domestic Competitive product except 

Priority Mail Express increased, with ground 

parcels and First-Class Package Service providing 

the bulk of the increase. The relatively high 

revenue per piece of the transferred single-piece 

retail parcels contributed to the large increase in 

First-Class Package Service revenue. The changes 

in revenue for the other categories are closely 

related to changes in volume.

Table III-25

Competitive Products Volume and Revenue, FY 2017 and FY 2016

Mail Volume Mail Revenue

(Millions) 

FY 2017

(Millions)

FY 2016

Increase 

or

Decrease

Percent

Change

($ in 

Millions) 

FY 2017

($ in 

Millions)

FY 2016

Increase 

or

Decrease

Percent

Change

Priority Mail Express 30 33 (3) -9.9% 766 809 (43) -5.4%

First-Class Package Service 960 776 183 23.6% 2,787 2,076 711 34.3%

Priority Mail 1,023 1,004 19 1.9% 8,340 7,785 555 7.1%

Ground Parcels 2,884 2,457 426 17.3% 6,194 5,192 1,003 19.3%

International 207 228 (21) -9.3% 1,749 1,792 (42) -2.4%

Domestic Services 853 833 20 2.4%

Total Competitive 5,103 4,499 604 13.4% 20,690 18,495 2,194 11.9%

Negative values are denoted by ().

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1.

23 Ground parcels include Standard Post, Parcel Select, and Parcel Return Service.

24 Docket No. MC2015-7, Order Conditionally Approving Transfer, July 20, 2017 (Order No. 4009).
CHAPTER III | 65

Table III-26

Competitive Products Attributable Costs, FY 2017 and FY 2016

Attributable Cost Unit Attributable Cost

($ in 

Millions) 

FY 2017

($ in 

Millions)

FY 2016

Increase 

or

Decrease

Percent

Change

(Cents 

per Piece) 

FY 2017

(Cents 

per Piece)

FY 2016

Increase 

or

Decrease

Percent

Change

Priority Mail Express 329 357 (27.3) -7.6% 1,107.0 1,079.6 27.4 2.5%

First-Class Package Service 1,936 1,469 467.9 31.9% 201.8 189.2 12.6 6.7%

Priority Mail 6,324 6,128 195.7 3.2% 618.2 610.2 8.0 1.3%

Ground Parcels 3,550 3,055 495.2 16.2% 123.1 124.3 (1.2) -1.0%

International 1,053 1,049 3.9 0.4% 508.1 459.2 48.8 10.6%

Domestic Services 429 426 3.3 0.8%

Total Competitive 13,884 12,490 1,393.5 11.2% 272.1 277.6 (5.5) -2.0%

Negative values are denoted by ().

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1.

25 Postal Service FY 2017 Form 10-K at 20.

Figure III-16

Competitive Volume by Product, FY 2007 – FY 2017

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1; Docket No. ACR2015, Library 

Reference PRC-LR-ACR2015/1; Docket No. ACR2014, Library Reference PRC-LR-ACR2014/1; FY 2007- FY 2013 ACD; Library Reference PRC-LR-1.

 

 Priority Ground Parcels First-Class Package Service Other Competitive

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Volume (Billions)

Fiscal Year

Priority Ground Parcels First-Class Package Service Other Competitive

Trends in Competitive Products

Competitive product volume growth has 

exceeded 10 percent each year since FY 2012. 

The growth in purchases of retail e-commerce 

has been the primary driver of volume increases 

for these products.25 Figure III-16 highlights the 

growth in Competitive categories since FY 2007.
66 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

As the volume of Competitive products has 

grown, so has the attributable cost, which now 

comprises 33 percent of total attributable cost. 

This is more than double the percentage of total 

attributable cost comprised by Competitive 

products in FY 2008. However, comparing total 

attributable cost over time is problematic due 

to mail classification changes that transferred 

products from the Market Dominant to the 

Competitive product list. These include the 

transfer of Commercial First-Class Mail Parcels 

to a new Lightweight Commercial Parcels 

category,26 Marketing Mail lightweight parcels 

to the Competitive ground parcels category, and 

single-piece Parcel Post from Market Dominant 

products to the Competitive Standard Post 

product. Most recently, First-Class Mail singlepiece retail Parcels were transferred to the FirstClass Package Services product. 

Figure III-17 shows the average unit attributable 

cost by category from FY 2008 to FY 2017.

Compared with FY 2016, average unit 

attributable cost increased for all Competitive 

parcel categories except ground parcels. Figure 

III-18 shows the percent change in average unit 

attributable cost by category from FY 2009 to 

FY 2017. It shows that FY 2012 was the only year 

in which the unit attributable cost decreased 

for each of the four categories. Average unit 

attributable costs for Priority Mail and Priority 

Mail Express have increased annually since FY 

2015. In contrast, the average unit attributable 

cost of ground parcels decreased for the third 

year in a row. The average unit attributable cost 

of First-Class Package Service increased in two of 

the last three years.

26 The Postal Service renamed the “Lightweight Commercial Parcels” category to “Commercial First-Class Package Service
CHAPTER III | 67

Figure III-17

Competitive Average Unit Attributable Cost by Category, FY 2008 – FY 2017

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1; Docket No. ACR2015, Library 

Reference PRC-LR-ACR2015/1; Docket No. ACR2014, Library Reference PRC-LR-ACR2014/1; FY 2008 - FY 2013 ACD; Library Reference PRC-LR-1.

 

 Priority Mail Express First-Class Package Service Priority Mail Ground Parcels

0

200

400

600

800

1,000

1,200

1,400

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Cents per Piece

Fiscal Year

Priority Mail Express First-Class Package Service Priority Mail Ground Parcels

Figure III-18

Competitive Percent Change in Average Unit Attributable Cost by Category, FY 2009 – FY 2017

Source: Library Reference PRC-LR-ACR2017/1; Docket No. ACR2016, Library Reference PRC-LR-ACR2016/1; Docket No. ACR2015, Library 

Reference PRC-LR-ACR2015/1; Docket No. ACR2014, Library Reference PRC-LR-ACR2014/1; FY 2008 - FY 2013 ACD; Library Reference PRC-LR-1.

 

 Priority Mail Express First-Class Package Service Priority Mail Ground Parcels

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

2009 2010 2011 2012 2013 2014 2015 2016 2017

Percent Change

Fiscal Year

Priority Mail Express First-Class Package Service Priority Mail Ground Parcels
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CHAPTER IV | 69

Introduction

The financial status of the Postal Service is affected by a combination of 

environmental, economic, and organizational factors, including the decisions 

and actions of management and the Postal Service Board of Governors.1 This 

chapter analyzes the Postal Service’s financial status in terms of sustainability, 

liquidity, and performance using financial ratios. These ratios provide a concise 

and systematic way to organize financial data into meaningful information.

PHOTOS BY ORHAN CAM

CHAPTER IV

Sustainability, Liquidity, 

Activity and Financial 

Solvency

PHOTO BY USPS

1 The Board of Governors delegated powers needed to provide for continuity of operations to a Temporary Emergency Committee composed of the

 remaining members of the Board. See 79 Fed. Reg. 74780 (December 16, 2014).
70 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

Financial ratios are used to interpret accounting 

information. The historic accounting information 

used in ratio analysis is not adjusted for inflation. 

Forecasts of an entity’s future revenue may 

not reflect its actual future revenue and cash 

flows because of changing demographics, 

industry dynamics, and government regulation 

unless these factors are explicitly accounted 

for in the development of the forecast. As with 

any approach, evaluating multiple financial 

dimensions and indicators provides a broader 

understanding of the financial status of entities.

The Commission acknowledges that financial 

analyses used in the private sector are not 

directly applicable to the Postal Service as a 

Federal Government entity because revenue 

streams, equity structures, and management 

incentives differ. Due to the myriad of ways 

Federal Government entities differ from the 

private sector, the standard measurements 

used to assess the financial health of private 

sector firms generally do not carry the same 

weight when applied to Federal Government 

entities. Additionally, in the private sector, 

stakeholders use financial analysis to make 

investment and credit decisions, and success 

is often measured by the company’s stock 

valuation. In contrast, Federal Government 

entities are mission-oriented and measure 

success through the provision of service and do 

not have direct shareholders. Nonetheless, the 

ratios provide an objective, quantitative measure 

of an entity’s financial health and its ability to 

satisfy its financial obligations.

Ratio analysis helps assess profitability and 

informs stakeholders of an entity’s performance 

based on its current earnings. For example, 

computing a solvency ratio, such as debt ratio, 

reveals the correlation between assets and 

liabilities. Both the ability to meet its short-term 

financial obligations (liquidity) and the ability to 

meet long-term financial obligations (solvency) 

are critical in evaluating the Postal Service’s 

current financial situation.

Comparing ratios for the current fiscal year 

to previous years and historic averages also 

provides valuable insight when analyzing past 

performance and can help identify weaknesses 

and highlight improvements. This year, the 

Commission has not included pro forma ratios, 

which exclude the impact of the RHBF prefunding 

payments. The Commission made this decision 

because the Postal Service’s relationship with the 

RHBF changed in FY 2017. See Chapter 2. In brief, 

in FY 2017, the Postal Service’s obligation shifted 

from a fixed and accelerated prefunding schedule 

to the type of retirement expenses typical of 

retirement plans.

The objectives of this chapter are to:

• Compare and analyze the financial 

statements over a period of time2

• Measure the sustainability and liquidity of 

the Postal Service

• Analyze the annual growth rate and growth 

patterns of the Postal Service’s income and 

assets over time through trend analyses

• Analyze the Postal Service’s overall financial 

performance

1 The Board of Governors delegated powers needed to provide for continuity of operations to a Temporary Emergency Committee composed of the 

remaining members of the Board. See 79 Fed. Reg. 74780 (December 16, 2014).

2 Financial statements are analyzed from FY 2006, the fiscal year prior to the enactment of the PAEA, through FY 2017, the most recently audited fiscal year.
CHAPTER IV | 71

Financial Sustainability Analysis

This section focuses on three key financial 

ratios which analyze the Postal Service’s overall 

financial health: debt ratio, fixed asset to net 

worth ratio, and current liability ratio.

Table IV-1 shows the three sustainability ratios 

calculated using amounts reported on the 

Postal Service’s Balance Sheets. The table then 

compares the FY 2017 results with the previous 

year’s value and the historical 10-year average 

(FY 2007–FY 2016).

Negative values are denoted by (). Numbers may not add across due to rounding.

Source: USPS FY 2017 Form 10-K Statement at 46.

Ratios 9/30/2017 

Value

9/30/2016 

Value Change Description of Ratio 

Postal Service 

Historic 10-Year 

Average Value

Debt Ratio 

(Debt to Assets Ratio) 3.14 3.22 (0.08)

This ratio is calculated 

by dividing total liabilities (i.e. long-term and 

short-term liabilities) by 

total assets. It shows how 

much the company relies 

on debt to finance assets.

2.13

Fixed Assets to 

Net Worth Ratio (0.25) (0.27) 0.02

This ratio indicates 

the extent to which the 

entity's cash is frozen in 

the form of fixed assets, 

such as property, plant, 

and equipment.

(0.18)

Current Liability Ratio 0.72 0.67 0.05

This ratio is calculated by 

dividing current liabilities 

by total (i.e. current and 

noncurrent) liabilities.

0.56

Table IV-1

Sustainability Ratio Analysis of Postal Service Financial Statements

DEBT RATIO

Debt ratio is the amount of debt the entity has 

on its Balance Sheets compared to its assets. 

Debt ratio is one of the primary ratios used to 

assess financial stability. The higher the ratio, 

the greater the risk that the entity’s debt level 

may impede its ability to effectively respond to 

challenges and opportunities. A low debt ratio 

indicates assets are available to secure future 

financing to grow operations with little or no 

financial risk.

The ratio generally indicates the relationship 

between two main sources of capital: equity 

and borrowed capital. It generally calculates 

the relationship between liabilities and overall 

capital (i.e., the sum of equity and liabilities). 

As it pertains to the Postal Service, the debt 

ratio provides information about the Postal 

Service’s ability to absorb reductions in asset 

value that may arise from the sale, disposition, or 

depreciation of assets.
72 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

At the end of FY 2017, the debt ratio for the 

Postal Service decreased to 3.14, from the 3.22 

debt ratio for FY 2016. The Postal Service’s 

FY 2017 debt ratio of 3.14 was higher than 

the average 10-year debt ratio of 2.13. The 

ratio indicates that the Postal Service does not 

possess sufficient capital. This lack of sufficient 

capital is highly relevant in light of the fact that 

the Postal Service has maximized its statutory 

borrowing capacity.

The slight improvement in the value of the ratio 

for FY 2017 is due to total assets, primarily cash, 

increasing at a greater percentage rate than total 

liabilities. The combined accrual of amortization 

for unpaid retirement obligations, RHB normal 

costs, and the reduction in long-term workers’ 

compensation obligations are lower than the 

defaulted statutory prefunding into the RHBF 

that occurred in the prior year. To reduce its 

debt ratio to historic averages, the Postal Service 

would have to increase either its current cash 

position, investments in capital assets, or both, 

and reduce its obligations.

FIXED ASSET TO NET WORTH RATIO

The fixed asset to net worth ratio analyzes fixed 

assets as a percentage of net worth to determine 

liquidity. Net worth is the residual amount 

representing the excess of an entity’s assets over 

its liabilities. The Postal Service’s fixed assets 

consist primarily of buildings and equipment 

which cannot be easily converted into cash.

The Postal Service accumulated deficits in excess 

of its fixed assets, which results in a negative 

fixed asset to net worth ratio. This signifies 

an inability to rapidly respond to financial 

emergencies or easily obtain cash for further 

investment and growth.

As shown in Table IV-1, the ratio improved 

slightly over the prior year, but remained 

negative in FY 2017. Accumulated net deficits 

from the continuous total net losses impacted the 

value of this ratio as the amount of fixed assets 

has remained relatively unchanged due to lack of 

capital investments.

CURRENT LIABILITY RATIO

The current liability ratio is a useful 

measurement when reviewing an entity’s debt 

structure as it indicates the percentage of 

current debt required to be paid within 1 year. 

As of September 30, 2017, the Postal Service’s 

short-term liabilities were 71.8 percent of total 

liabilities, an increase of 4.5 percentage points 

from the prior year. An increasing current 

liability ratio value is generally a sign of financial 

pressure because it indicates growth in the 

proportion total liabilities that must be paid 

within one year.

The accrual of the unpaid retirement 

amortization, statutory RHBF prefunding, 

and RHB normal cost payments are included 

in current obligations, and account for the 

vast majority of current liabilities. Current 

liabilities include $33.9 billion in unpaid 

statutory prefunding to the RHBF, $3.6 billion in 

amortization of unfunded retirement obligations, 

$3.3 billion in RHB normal cost, and $10.1 billion 

of the $15.0 billion in outstanding debt.
CHAPTER IV | 73

Financial Liquidity Analysis

Liquidity-related ratios focus on working capital 

and are one of the most widespread indicators of 

an entity’s solvency.3 There are three liquidityrelated ratios: current ratio, quick ratio, and cash 

ratio. These ratios supplement the Statement of 

Operations and Statement of Cash Flows and are 

a measure of an entity’s ability to pay short-term 

obligations. The values of the three ratios for the 

Postal Service are shown in Table IV-2.

Ratios 9/30/2017 

Value

9/30/2016 

Value Change Description of Ratio 

Postal Service 

Historic 10-Year 

Average Value

Current Ratio 0.20 0.17 0.03

This ratio is calculated by 

dividing current assets 

by current liabilities. 

It indicates an entity's 

ability to meet short term 

debt obligations.

0.16

Quick Ratio 0.19 0.17 0.02

This ratio is calculated 

by dividing liquid assets 

(cash, cash equivalents 

and short term 

investments, current 

receivables) by current 

liabilities. It is a measure 

of an entity's ability 

to meet its short term 

obligations using its most 

liquid assets (near cash 

or quick assets). 

0.15

Cash Ratio 0.17 0.15 0.02

This ratio is calculated 

by dividing absolute 

liquid assets (cash, cash 

equivalents and shortterm investments) by 

current liabilities. 

0.11

Table IV-2

Liquidity Ratio Analysis of Postal Service Financial Statement

Negative values are denoted by (). Numbers may not add across due to rounding.

Source: USPS FY 2017 Form 10-K Statement at 46.

3

 See Jamie Pratt, Financial Accounting in an Economic Context, 246 part 3 (8th ed. 2011) stating that “Dun & Bradstreet, a widely used service that rates the 

creditworthiness of a large number of U.S. businesses, includes both the current ratio and the quick ratio as solvency measures” and “Working capital, the 

current ratio and the quick ratio are also used by auditors. For example, an AICPA list of ‘red flags’ alerting auditors to possible management fraud includes 

‘inadequate working capital.’”
74 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

CURRENT RATIO

The current ratio indicates the degree to which 

current assets meet current liabilities. The 

higher the current ratio, the more likely an entity 

can pay its current liabilities, because it has a 

larger proportion of current assets relative to its 

current liabilities.

At the end of FY 2017, the current ratio was 

0.20. That level is an improvement of 0.03 

from the end of the prior fiscal year. This is 

also an improvement over the 10-year historic 

average reflecting the yearly increase in the 

cash balance. Accrual of the current fiscal year’s 

defaulted payment for amortization of unfunded 

retirement obligations and the RHB normal cost 

increased current liabilities by 13.2 percent. At 

the same time, the Postal Service’s current assets 

increased by 26.8 percent, primarily due to the 

increase in cash and cash equivalents.

QUICK RATIO

The quick ratio is an indication of the liquidity of 

the entity and reflects whether sufficient funds 

are available to meet short-term obligations to 

creditors. At the close of FY 2017, the quick ratio 

equaled 0.19, an increase of 0.02 from FY 2016 

and 0.04 above the 10-year historic average. This 

is a positive sign, as it indicates that the Postal 

Service’s cash and accounts receivables increased 

at a faster rate than its current liabilities.

CASH RATIO

The cash ratio measures the amount of cash, 

cash equivalents, or short-term investments 

available to cover current liabilities. The cash 

ratio is calculated by dividing total liquid assets 

by current liabilities.

The FY 2017 cash ratio was 0.17—an 

improvement over FY 2016 and the 10-year 

historic average—but as with the current ratio 

and quick ratio, the cash ratio indicates that the 

Postal Service does not have enough cash and/or 

cash equivalents (the most liquid assets) to meet 

all current liabilities.

The improved liquidity-related ratios were 

largely a result of the increased amount of cash 

on hand held by the Postal Service. Although 

there is improvement in the Postal Service’s 

liquidity ratios, as discussed in the next section, 

its working capital has deteriorated.

WORKING CAPITAL ANALYSIS

Working capital is the amount by which the value 

of current assets exceeds current liabilities. 

Working capital is important because it is a liquid 

financial cushion available for emergencies and 

other unplanned needs. Positive working capital 

means that a company is able to meet its shortterm obligations. Negative working capital means 

that a company’s current assets cannot meet 

its short-term liabilities and as a result; it could 

have problems paying back creditors in the short 

term, ultimately adversely affecting its financial 

position. Companies with healthy, positive 

working capital should not have problems paying 

their bills.

The Postal Service had no working capital 

at the end of FY 2017. The Postal Service’s 

FY 2017 working capital was negative $49.8 

billion. The net deterioration of $4.7 billion in 

working capital from the prior fiscal year was 

largely due to the growth in employee-related 

liabilities, including the accruals for payments for 

retirement obligations.

Figure IV-1 highlights the increasing 

deficit in retained earnings that began in 

FY 2007. Available liquidity is calculated as a 

combination of working capital and remaining 

borrowing capacity.
CHAPTER IV | 75

Financial Activity Analysis

TREND ANALYSIS

Trend analysis compares the Postal Service’s 

financial statements over a number of years to 

evaluate its performance and the changes over a 

period of time from a base year. FY 2006 is used 

as the base year, as it is the fiscal year prior to 

the enactment of the PAEA and the last year in 

which the Postal Service reported a net operating 

income. Figure IV-2 shows the trends for assets and 

liabilities since the base year. For each fiscal year, 

the total change from the base year is expressed as 

a percentage.

The value of the Postal Service’s assets began 

declining in FY 2007 and continued to decline 

through FY 2013, with a slight improvement in 

FY 2009 and the last four fiscal years. Current 

assets (primarily cash and cash equivalents) 

increased from the base year as the safety net of 

available borrowing was depleted. After taking 

depreciation into account, FY 2017 net property, 

plant, and equipment values decreased 35.5 

percent from the base year. This is primarily due 

to reduced capital investments and because fullydepreciated assets have not been replaced.

Figure IV-1

Postal Service Liquidity and Retained Deficit Trends Since FY 2007

Source: Postal Service FY 2007 to FY 2017 Forms 10-K and USPS Annual Reports.

 (70,000)

 (60,000)

 (50,000)

 (40,000)

 (30,000)

 (20,000)

 (10,000)

 -

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

$ in millions

Retained Earnings (Deficit) Liquidity Available

 Retained Earnings (Deficit) Liquidity Available
76 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

Figure IV-3

Trends in Assets and Liabilities Since FY 2006

Source: Postal Service FY 2006 to FY 2017 Forms 10-K and USPS Annual Reports.

Figure IV-2

Change in Assets and Liabilities Since FY 2006

Source: Postal Service FY 2006 to FY 2017 Forms 10-K and USPS Annual Reports.

-50%

0%

50%

100%

150%

200%

250%

300%

350%

FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17

Percentage Change from Base Year

Fiscal Years

Total Assets Total Liabilities

Total Assets

Total 

Liabilities

0%

100%

200%

300%

400%

500%

600%

FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17

Percentage of Base Year Amount

Fiscal Years

Current Assets Noncurrent Assets Current Liabilities Noncurrent Liabilities

 Current Assets Noncurrent Assets Current Liabilities Noncurrent Liabilities 
CHAPTER IV | 77

The Postal Service had a higher cash balance 

at the end of FY 2009 due to a $4-billion 

reduction in the statutory RHBF payment due on 

September 30, 2009, which resulted in a higher 

balance in total assets and the improvement 

shown in Figure IV-2.

Conversely, total liabilities have risen steadily 

since the base year (FY 2006). The Postal 

Service’s total liabilities in FY 2017 were nearly 

four times higher than those in the base year.

Figure IV-3 shows that current and noncurrent 

liabilities trended upwards from the base year, 

largely due to increasing balances in employeerelated liabilities such as statutory retirement 

payments and future workers’ compensation 

obligations. The increase in current assets, 

comprised primarily of cash and cash 

equivalents, is insignificant when compared to 

the trend in current liabilities. Noncurrent assets, 

consisting largely of property and equipment, 

held relatively flat with a slight downward 

trend reflecting limited capital spending and 

depreciating fixed assets. Figure IV-3 shows that 

at the end of FY 2017, the value of noncurrent 

liabilities increased from the base year by a 

substantially greater percentage than the value 

of the noncurrent assets. Similarly, the growth of 

current liabilities greatly outpaced the growth of 

current assets with similar maturity dates. This 

highlights the Postal Service’s lack of liquidity.

Figure IV-4 shows the changes in revenue and 

expenses from the base year (FY 2006). In FY 

2017, revenue decreased 4.1 percent from the 

base year, while operating expenses increased by 

0.7 percent from the base year.

Reversing the trend of the last three years, 

revenue and expenses both decreased in FY 2017 

compared to FY 2016. The reduction in revenue 

was primarily due to the expiration of the exigent 

surcharge in the prior year and the continuing 

decline in mail volume. The decrease in expenses 

was largely the result of a reduction in the 

noncash adjustment for workers’ compensation.

The accrual of the retirement payments 

contributed to the 322.6 percent increase 

in retirement expenses from the base year. 

Compensation and benefits excluding retirement 

expenses decreased by 8.0 percent from the 

base year.

Figure IV-4

Change in Revenue and Expenses Since FY 2006

Source: Postal Service FY 2006 to FY 2017 Forms 10-K and USPS Annual Reports.

-15%

-10%

-5%

0%

5%

10%

15%

FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17

Percentage Change from Base Year

Fiscal Years

Total Revenue Operating expenses

Operating Expenses

Total Revenue
78 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

As seen in Figure IV-5, operating revenue, 

compensation and benefits, transportation, 

and other benefits has remained relatively flat 

since FY 2006. Similar to the growth in current 

liabilities, retiree health benefit payments 

(including the mandatory retirement accruals 

since FY 2012) have trended upwards from the 

base year. The reduction in retirement-related 

expenses and workers’ compensation for FY 2017 

results from lower retirement health benefit 

expenses compared to the prior year statutory 

prefunding of the RHBF and a decrease in 

noncash workers’ compensation compared to the 

prior year. See Figure IV-5.

Financial Solvency Analysis

ALTMAN Z-SCORE

The financial strength of an entity can be 

evaluated through the use of a variety of metrics. 

In conjunction with financial ratios, these 

metrics are used to gauge an entity’s long-term 

viability. The Altman Z-Score model, developed 

in 1968, is a tool to examine the likelihood 

that a publicly-traded private company may 

file for bankruptcy.4 It has since been used as 

a measure to analyze the financial health of 

state and local governments and continues to 

be widely accepted as a measure of an entity’s 

financial health.5

The Altman Z-Score is a quantitative model 

designed to predict the financial distress of 

a business. It uses a blend of four traditional 

financial ratios and a statistical method known 

as multiple discriminant analysis. The Altman 

Z-Score is interpreted against discrimination 

ranges, which provide context as to what an 

individual Altman Z-Score means to an entity’s 

financial health. 

Figure IV-5

Trends in Operating Revenue and Operating Expenses Since FY 2006

Source: Postal Service FY 2006 to FY 2017 Forms 10-K and USPS Annual Reports.

-200%

-100%

0%

100%

200%

300%

400%

500%

600%

700%

800%

900%

Percentage of Base Year Amount

FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17

Fiscal Years

Compensation and benefits Retirement expenses Workers' compensation

Transportation Other operating expenses Operating Revenue

 Compensation and Benefits Retirement Expenses Workers’ Compensation

 Transportation Other Operating Expenses Operating Revenue 

4 The Postal Service, as a government entity, is not considered a “person” who may be a debtor under the Bankruptcy Code. See 11 U.S.C. §§ 101(41), 

109(d). The Altman Z-Score is used as a metric that may be instructive in comparing the Postal Service with other business entities which may be subject 

to bankruptcy. Use of the Altman Z-Score does not suggest that the Postal Service has the potential to file for bankruptcy.

5 See Mary Fischer, et al., Fiscal Health Analysis of Texas and its Municipalities, 13 J. Bus. & Econ. Res. 4 (2015).
CHAPTER IV | 79

A lower Altman Z-Score reflects higher odds of 

bankruptcy6 and financial distress. In particular, 

the discrimination ranges divide Altman Z-Scores 

into three zones:

• 1.1 or Less = Distress Zone based on publicly 

available financial data

• 1.1 to 2.6 = Grey Zone based on publicly 

available financial data

• 2.6 or More = Safe Zone based on publicly 

available financial data

The Altman Z-Score model used in this analysis 

is a revised Z-Score Model adapted specifically 

for non-manufacturing firms to calculate a score, 

without a capital turnover ratio (sales/total 

assets), so as to minimize the potential effect of 

different methods of financing assets.7 The Postal 

Service’s Altman Z-Score provides insight into 

the Postal Service’s financial health, especially 

in light of the fact that the Postal Service has 

reached its maximum statutory borrowing 

limit from the Federal Financing Bank. Cash 

generated from operations is the only source 

of income available to satisfy daily operating 

expenses and investment in capital assets.

As shown in Table IV-3, the Postal Service’s 

Altman Z-Score was negative 5.9 at the end of 

FY 2017. The Postal Service’s FY 2017 Altman 

Z-Score was better than the FY 2016 score of 

negative 6.4. Higher cash balances and lower 

retirement-related expenses increased total 

assets and earnings compared to the prior 

year, resulting in improved ratios of Retained 

Earnings to Total Assets and Earnings to 

Total Assets.

Negative values are denoted by (). Numbers may not add across due to rounding.

Source: Postal Service FY 2017 Form 10-K at 46.

Table IV-3

Altman Z-Score, FY 2017

Ratio Calculation Ratio Value on 

9/30/2017 Weighting Factor Product(col. 3 * col. 4)

1 2 3 4 5

T1 Working Capital/Total Assets (1.8) 1.2 (2.2)

T2 Retained Earnings/Total Assets (2.1) 1.4 (3.0)

T3 Earnings/Total Assets (0.1) 3.3 (0.3)

T4 Capital/Total Liabilities (0.7) 0.6 (0.4)

Altman Z-Score (5.9)

4

 Although the Postal Service has reached its borrowing limit, it is ineligible for Federal bankruptcy protection under current law. 

See 11 U.S.C. §§ 101(41), 109. 5 See supra at 11 n.4.
80 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

Prior to enactment of the PAEA, at the end of FY 

2006, the Postal Service had a positive Altman 

Z-Score of 0.2 and positive scores for all ratio 

values except for the Working Capital/Total 

Assets ratio. See Table IV-4.

DECONSTRUCTING THE ALTMAN Z-SCORE

WORKING CAPITAL TO TOTAL ASSETS

The Working Capital to Total Assets ratio measures 

a company’s efficiency and its short-term financial 

health by comparing its net current assets to its 

total assets. Working capital is a company’s current 

assets minus its current liabilities. Therefore, 

a change in the total amount of current assets 

without a change of the same amount in current 

liabilities will result in a change in the amount of 

working capital. Similarly, a change in the total 

amount of current liabilities without an identical 

change in the total amount of current assets will 

cause a change in working capital.

The Postal Service’s working capital to total 

assets weighted ratio is shown in Figure IV-6.

An increasing Working Capital to Total Assets 

ratio over time is usually a positive sign, showing 

improving liquidity. A decreasing Working Capital 

to Total Assets ratio is usually a negative sign, 

indicating a greater amount of total current 

liabilities, and a reduced amount of working 

capital available. This ratio increased briefly for 

the Postal Service from FY 2008–FY 2009 (though 

still negative) and has declined in succeeding fiscal 

years.8 The steep decline in this ratio after FY 

2012 is the result of a higher percentage decline in 

working capital compared to total assets, largely 

a result of from the accrued defaulted prefunding 

retiree health payments.

RETAINED EARNINGS TO TOTAL ASSETS

The retained earnings of a company are the 

portion of net earnings retained for future use.9

 They are “retained” to be reinvested in the firm 

or used to pay down debt. Retained earnings are 

calculated as follows:

• Previous year’s retained earnings + current 

year’s net income (net loss)

The Retained Earnings to Total Assets ratio 

measures the company’s effectiveness in using 

all of its assets to accumulate earnings. Retained 

earnings combined with the capital contribution 

Table IV-4

Altman Z-Score, FY 2006

Ratio Calculation Ratio Value on 

9/30/2006 Weighting Factor Product(col. 3 * col. 4)

1 2 3 4 5

T1 Working Capital/Total Assets (0.3) 1.2 (0.4)

T2 Retained Earnings/Total Assets 0.2 1.4 0.3 

T3 Earnings/Total Assets 0.0 3.3 0.1 

T4 Capital/Total Liabilities 0.3 0.6 0.2 

Altman Z-Score 0.2 

Negative values are denoted by (). Numbers may not add across due to rounding.

Source: USPS FY 2006 Annual Report at 42.

8

 P.L. 111-68 reduced the statutory RHBF payment due on September 30, 2009, by $4 billion, increasing the cash balance at the end of FY 2009 and contributing to the improved value of the FY 2009 Working Capital to Total Assets Ratio. The Postal Service states that “[it] experienced negative cash flow from 

operations for two of the past three years. In 2009, [it] reduced our [RHBF] payment by $4 billion due to the passage of P.L. 111-68. Had this reduction not 

been enacted, cash flow from operations would have been negative in 2009 as well.” Postal Service FY 2009 Form 10-K at 55.

9 A company may not retain all of its net income if it distributes a portion to shareholders in the form of a dividend. The Postal Service does not have shareholders and does not pay dividends, so all of its net income (or net loss) accumulates as retained earnings or deficits.
CHAPTER IV | 81

of the U.S. Government10 represents the difference 

between assets and liabilities, and therefore 

it provides a measure of the extent to which a 

company relies on debt, or leverage. The lower 

the ratio of Retained Earnings to Total Assets, the 

more a company funds assets through borrowing, 

instead of through retained earnings. A lower ratio 

indicates an increased risk of financial distress if 

the firm cannot meet its debt obligations.

The Postal Service’s Retained Earnings to Total 

Assets weighted ratio is shown in Figure IV7. Until the increase in FY 2017, this ratio has 

steadily declined for the Postal Service since FY 

2006. A decreasing Retained Earnings to Total 

Assets ratio is usually a negative sign, indicating 

possible problems with a company’s profitability. 

As an entity grows and matures, this ratio is 

generally expected to increase. Recurring losses 

Figure IV-6

Trend in Working Capital/Total Assets Weighted Ratio Since FY 2006

Source: Postal Service FY 2006 to FY 2017 Forms 10-K and USPS Annual Reports.

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Weighted Ratio Value

10 Total capital contributions of the U.S. Government are $3,132 billion as of September 30, 2017. See Postal Service FY 2017 Form 10-K at 47.

Figure IV-7

Trend in Retained Earnings/Total Assets Weighted Ratio Since FY 2006

Source: Postal Service FY 2006 to FY 2017 Forms 10-K and USPS Annual Reports.

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Weighted Ratio Value
82 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

suffered after FY 2007 by the Postal Service have 

eroded its retained earnings, which is reflected 

in the substantial decline in this ratio. The slight 

uptick in the change in value for FY 2017 is due to 

the increased end-of-year cash balance resulting 

in a 8.6 percent growth in total assets.

EARNINGS TO TOTAL ASSETS

Earnings to Total Assets is a measure of return 

on assets and is calculated by dividing net 

income (net loss) by total assets. This ratio 

assesses a firm’s ability to generate profits from 

its assets. The Postal Service’s earnings to total 

assets weighted ratio is shown in Figure IV-8.

FY 2006 showed a positive ratio. This was during 

the Postal Reorganization Act regime when 

revenue was required to cover costs (breakeven). The effects of the Great Recession of 

2008–2009 are captured in the large decrease in 

the ratio over those years. In addition, P.L. 111-

68 reduced the RHBF prefunding contribution 

by $4.0 billion to $1.4 billion in 2009. No similar 

legislation was enacted in 2010. In 2011, P.L. 112-

33 delayed the $5.5 billion payment due in 2011 

to 2012. The dip in the ratio in 2012 is largely the 

result of two RHBF prefunding payments totaling 

$11.1 billion. The exigent surcharge in FY 2014 

improved profitability through part of FY 2016.11

The 8.6 percent increase in total assets, due to 

the increased cash balance, improved this ratio at 

the end of FY 2017.

Figure IV-8

Trend in Earnings/Total Assets Weighted Ratio Since FY 2006

Source: Postal Service FY 2006 to FY 2017 Forms 10-K and USPS Annual Reports.

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Weighted Ratio Value

11 See Docket No. R2013-11, Order Granting Exigent Price Increase, December 24, 2013 (Order No. 1926).
CHAPTER IV | 83

Source: Postal Service FY 2006 to FY 2017 Forms 10-K and USPS Annual Reports.

Figure IV-9

Trend in Capital/Total Liabilities Weighted Ratio Since FY 2006

-0.5

-0.4

-0.3

-0.2

-0.1

0.0

0.1

0.2

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Weighted Ratio Value

CAPITAL TO TOTAL LIABILITIES

The ratio of Capital to Total Liabilities shows the 

extent to which an entity’s value can decline before 

its liabilities exceed its assets. Generally, a higher 

capital balance indicates a greater likelihood of 

future survival. The Postal Service’s capital to total 

liabilities weighted ratio is shown in Figure IV-9.

For purposes of the Altman Z-Score, capital is 

calculated as the book value of equity which 

for the Postal Service is capital contributions 

and retained earnings. The Postal Service’s 

recurring net losses and increasing liabilities 

are reflected in the decline in this ratio. In FY 

2017, the value of this ratio remains relatively 

flat from the prior year.
84 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

-7.0

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Source: Postal Service FY 2006 to FY 2017 Forms 10-K and USPS Annual Reports.

Figure IV-10

Trend in Altman Z-Score Value Since FY 2006

SHIFT IN ALTMAN Z-SCORE

When analyzing the Altman Z-Score, it is important 

to analyze the trend over time. In the case of 

the Postal Service, the steady decline, as shown 

in Figure IV-10, is a reflection of the erosion of 

retained earnings primarily caused by consecutive 

net losses and statutory retirement expenses.

The Postal Service’s slightly improved Altman 

Z-Score at the end of FY 2017 is the result of: 

(1) a higher balance in total assets due to an 

increased cash balance likely the result of 

limited investment in capital infrastructure and 

equipment and the nonpayment of retirement 

expenses and (2) reduced retirement-related 

expenses compared to the prior year’s statutory 

prefunding of RHBF. The Postal Service defaulted 

on its FY 2017 payment of amortization on its 

retirement-related unfunded obligations.
APPENDIX A | 85

Appendix A

Fiscal Year 2017 Volume, Revenue, Incremental Cost and Cost Coverage by Class

Current Classification (Products)

Contribution to Contribution to

Attributable Total Vol Var & Institutional Institutional

Volume Revenue (Incremental) Cost Prod Spec Cost Cost Rev./Pc. Cost/Pc. Cost/Pc. Cost

(000) ($ 000) (000) (000) ($ 000) (Cents) (Cents) (Cents) Coverage

COMPETITIVE MAIL

Priority Mail Express 29,763 765,969 329,481 329,262 436,488 2,573.591 1,107.028 1,466.564 232.5%

Priority Mail 1,022,959 8,340,269 6,323,582 6,236,182 2,016,687 815.308 618.166 197.143 131.9%

Ground Parcels 2,883,814 6,194,149 3,550,464 3,505,588 2,643,685 214.790 123.117 91.673 174.5%

First-Class Package Service 959,629 2,786,807 1,936,496 1,929,861 850,310 290.405 201.796 88.608 143.9%

Competitive Domestic Services 852,962 428,797 428,670 424,166 198.9%

Competitive Domestic Inframarginal 194,320

Competitive Domestic Group Specific Costs 43,074

Total Competitive Domestic Mail 4,896,165 18,940,156 12,806,213 12,429,563 6,133,943 386.837 261.556 125.281 147.9%

Competitive International Mail & Services 207,266 1,749,387 1,053,036 1,052,563 696,351 844.030 508.060 335.970 166.1%

Total Competitive Inframarginal Costs 24,713

Total Competitive Mail and Services 5,103,431 20,689,544 13,883,962 13,482,126 6,805,582 405.405 272.052 133.353 149.0%

MARKET DOMINANT MAIL

First-Class Mail

Single-Piece Letters and Cards 18,503,215 9,040,612 5,552,148 5,350,646 3,488,464 48.860 30.006 18.853 162.8%

Presort Letters and Cards 38,795,454 14,604,136 4,570,664 4,501,582 10,033,472 37.644 11.781 25.862 319.5%

Flats 1,448,266 1,991,588 1,532,900 1,529,877 458,688 137.515 105.844 31.672 129.9%

Parcels 190,931 547,444 478,678 477,818 68,766 286.724 250.708 36.016 114.4%

First-Class Inframarginal Costs 269,053

Total Domestic First-Class Mail 58,937,866 26,183,779 12,403,442 11,859,923 13,780,337 44.426 21.045 23.381 211.1%

MARKETING MAIL

High Density & Saturation Letters 7,093,856 1,092,989 514,913 512,040 578,076 15.408 7.259 8.149 212.3%

High Density & Saturation Flats & Parcels 11,252,248 1,989,139 1,262,624 1,243,097 726,515 17.678 11.221 6.457 157.5%

Carrier Route 7,297,237 1,903,188 1,531,167 1,524,686 372,021 26.081 20.983 5.098 124.3%

Letters 46,973,209 9,599,675 4,912,152 4,802,623 4,687,524 20.436 10.457 9.979 195.4%

Flats 4,954,551 1,905,538 2,574,475 2,565,967 (668,937) 38.460 51.962 (13.501) 74.0%

Parcels 40,582 46,923 72,765 72,758 (25,842) 115.626 179.306 (63.680) 64.5%

Every Door Direct Mail - Retail 758,160 134,367 50,009 49,942 84,358 17.723 6.596 11.127 268.7%

Inbound NSA Mail Intl 0 0 0 0

Marketing Mail Inframarginal Costs 447,127

Total Marketing Mail 78,369,843 16,671,819 11,365,231 10,771,113 5,306,588 21.273 14.502 6.771 146.7%

PERIODICALS

Within County 516,432 58,017 84,667 84,637 (26,650) 11.234 16.395 (5.160) 68.5%

Outside County 4,784,313 1,316,722 1,898,131 1,892,867 (581,409) 27.522 39.674 (12.152) 69.4%

Periodicals Inframarginal Costs 590

Total Periodicals 5,300,745 1,374,739 1,983,387 1,977,504 (608,649) 25.935 37.417 (11.482) 69.3%

PACKAGE SERVICES

Alaska Bypass 1,306 33,700 17,426 17,426 16,274 2,581.279 1,334.749 1,246.530 193.4%

Bound Printed Matter Flats 264,493 201,673 132,555 132,521 69,118 76.249 50.117 26.132 152.1%

Bound Printed Matter Parcels 277,594 298,637 270,269 269,955 28,368 107.581 97.361 10.219 110.5%

Media and Library Mail 76,497 267,122 352,714 351,941 (85,592) 349.194 461.084 (111.890) 75.7%

Package Services Inframarginal Costs 810

Total Package Services 619,888 801,131 773,773 771,843 27,359 129.238 124.825 4.413 103.5%

U.S. Postal Service Mail 318,897

Free Mail 44,233 40,265 40,261 (40,265) 91.029

Total Market Dominant Mail 143,591,472 45,031,468 26,566,098 25,420,643 18,465,370 31.361 18.501 12.860 169.5%

Market Dominant Services

Ancillary Services

Certified Mail 666,790 558,699 549,891 108,090 119.3%

COD 4,171 2,621 2,621 1,549 159.1%

Insurance 74,467 46,919 46,827 27,548 158.7%

Registered Mail 30,382 21,869 21,866 8,513 138.9%

Stamped Envelopes 12,199 7,929 7,925 4,270 153.9%

Stamped Cards 916 319 319 598 287.6%

Other Ancillary Services 433,913 218,882 216,794 215,031 198.2%

Money Orders 152,373 156,391 154,776 (4,017) 97.4%

Post Office Box Service 278,659 230,817 230,762 47,842 120.7%

Caller Service 90,991 25,259 25,238 65,732 360.2%

Other Special Services 38,292 12,730 12,730 25,563 300.8%

Market Dominant Services Inframarginal Costs 23,609 0

Total Market Dominant Domestic Services 1,783,154 1,306,044 1,269,748 477,110

Outbound Single-Piece Mail Intl 152,094 231,106 139,322 139,322 91,784

Inbound Single-Piece Mail Intl 643,636 707,352 741,160 741,160 (33,808)

International Services 35,284 40,936 40,936 (5,653)

Market Dominant International Inframarginal Costs 936

Market Dominant International Mail & Services 795,731 973,742 922,354 921,418 51,387

Other Income 1,110,346 1,110,346

Other International Mail Attributable 57,558 0 (57,558)

Total Mail and Services 149,490,633 69,588,253 42,736,015 41,151,493 26,852,238 46.550 28.588 17.962 162.8%

Institutional Costs 29,700,299

Institutional Costs Paid by Competitive (%) 22.91%

Appropriations: Revenue Forgone 47,944

Investment Income 58,405

Total Revenues 69,694,602

Total Costs 72,436,314

Net Income (Loss) (2,741,712)

Source: Library Reference PRC-FinRpt17-NP1
86 | POSTAL REGULATORY COMMISSION • FY 2017 FINANCIAL ANALYSIS

Appendix B

Fiscal Year 2017 Volume, Revenue, Attributable Cost and Cost Coverage by Class

Current Classification (Products)

(USPS CRA Report)

Contribution to Contribution to

Attributable Total Vol Var & Institutional Institutional

Volume Revenue (Incremental) Cost Prod Spec Cost Cost Rev./Pc. Cost/Pc. Cost/Pc. Cost

(000) ($ 000) (000) (000) ($ 000) (Cents) (Cents) (Cents) Coverage

COMPETITIVE MAIL

Priority Mail Express 29,763 765,969 329,435 329,262 436,534 2,573.591 1,106.875 1,466.717 232.5%

Priority Mail 1,022,959 8,340,269 6,271,817 6,236,182 2,068,451 815.308 613.106 202.203 133.0%

Ground Parcels 2,883,814 6,194,149 3,522,125 3,505,588 2,672,025 214.790 122.134 92.656 175.9%

First-Class Package Service 959,629 2,786,807 1,933,331 1,929,861 853,476 290.405 201.466 88.938 144.1%

Competitive International Mail 207,266 1,742,448 1,044,489 1,044,489 697,960 840.682 503.936 336.746 166.8%

Competitive Domestic Services 852,962 428,797 428,670 424,166 198.9%

Competitive International Services 6,939 8,074 8,074 (1,135) 85.9%

Total Competitive Mail and Services 5,103,431 20,689,544 13,538,067 13,482,126 7,151,476 405.405 265.274 140.131 152.8%

MARKET DOMINANT MAIL

First-Class Mail

Single-Piece Letters and Cards 18,503,215 9,040,612 5,532,042 5,350,646 3,508,570 48.860 29.898 18.962 163.4%

Presort Letters and Cards 38,795,454 14,604,136 4,564,788 4,501,582 10,039,347 37.644 11.766 25.878 319.9%

Flats 1,448,266 1,991,588 1,532,900 1,529,877 458,688 137.515 105.844 31.672 129.9%

Parcels 190,931 547,444 478,678 477,818 68,766 286.724 250.708 36.016 114.4%

Outbound Single-Piece Mail Intl 152,094 231,106 139,322 139,322 91,784 151.949 91.603 60.347 165.9%

Inbound Single-Piece Mail Intl 643,636 707,352 741,160 741,160 (33,808) 109.899 115.152 (5.253) 95.4%

Total First-Class Mail 59,733,597 27,122,237 12,988,890 12,740,405 14,133,347 45.405 21.745 23.661 208.8%

MARKETING MAIL

High Density & Saturation Letters 7,093,856 1,092,989 514,913 512,040 578,076 15.408 7.259 8.149 212.3%

High Density & Saturation Flats & Parcels 11,252,248 1,989,139 1,262,535 1,243,097 726,604 17.678 11.220 6.457 157.6%

Carrier Route 7,297,237 1,903,188 1,530,886 1,524,686 372,302 26.081 20.979 5.102 124.3%

Letters 46,973,209 9,599,675 4,912,152 4,802,623 4,687,524 20.436 10.457 9.979 195.4%

Flats 4,954,551 1,905,538 2,574,440 2,565,967 (668,903) 38.460 51.961 (13.501) 74.0%

Parcels 40,582 46,923 72,765 72,758 (25,842) 115.626 179.306 (63.680) 64.5%

Every Door Direct Mail - Retail 758,160 134,367 50,009 49,942 84,358 17.723 6.596 11.127 268.7%

Inbound NSA Mail Intl 0 0 0 0

Total Marketing Mail 78,369,843 16,671,819 10,917,700 10,771,113 5,754,119 21.273 13.931 7.342 152.7%

PERIODICALS

Within County 516,432 58,017 84,667 84,637 (26,650) 11.234 16.395 (5.160) 68.5%

Outside County 4,784,313 1,316,722 1,898,131 1,892,867 (581,409) 27.522 39.674 (12.152) 69.4%

Total Periodicals 5,300,745 1,374,739 1,982,798 1,977,504 (608,059) 25.935 37.406 (11.471) 69.3%

PACKAGE SERVICES

Alaska Bypass 1,306 33,700 17,426 17,426 16,274 2,581.279 1,334.749 1,246.530 193.4%

Bound Printed Matter Flats 264,493 201,673 132,555 132,521 69,118 76.249 50.117 26.132 152.1%

Bound Printed Matter Parcels 277,594 298,637 270,269 269,955 28,368 107.581 97.361 10.219 110.5%

Media and Library Mail 76,497 267,122 352,714 351,941 (85,592) 349.194 461.084 (111.890) 75.7%

Total Package Services 619,888 801,131 772,963 771,843 28,168 129.238 124.694 4.544 103.6%

U.S. Postal Service Mail 318,897

Free Mail 44,233 40,265 40,261 (40,265) 91.029

Total Market Dominant Mail 144,387,203 45,969,926 26,702,616 26,301,125 19,267,310 31.838 18.494 13.344 172.2%

MARKET DOMINANT SERVICES

Ancillary Services

Certified Mail 666,790 558,699 549,891 108,090 119.3%

COD 4,171 2,621 2,621 1,549 159.1%

Insurance 74,467 46,919 46,827 27,548 158.7%

Registered Mail 30,382 21,869 21,866 8,513 138.9%

Stamped Envelopes 12,199 7,929 7,925 4,270 153.9%

Stamped Cards 916 319 319 598 287.6%

Other Ancillary Services 433,913 218,882 216,794 215,031 198.2%

Money Orders 152,373 156,391 154,776 (4,017) 97.4%

Post Office Box Service 278,659 230,817 230,762 47,842 120.7%

Caller Service 90,991 25,259 25,238 65,732 360.2%

Other Special Services 38,292 12,730 12,730 25,563 300.8%

International Services 35,284 40,936 40,936 (5,653) 86.2%

Total Market Dominant Services 1,818,437 1,323,371 1,310,684 495,066

Other Income 1,110,346 1,110,346

Other International Mail Attributable 0 57,558

Total Mail and Services 149,490,633 69,588,253 41,564,055 41,151,493 28,024,199 46.550 27.804 18.746 167.4%

Institutional Costs 30,872,259

Appropriations: Revenue Forgone 47,944

Investment Income 58,405

Total Revenues 69,694,602

Total Costs 72,436,314

Net Income (Loss) (2,741,712)

Source: Library Reference PRC-FinRpt17-NP1
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