Analysis of Statements of Operations To facilitate a detailed financial analysis of the Postal Service’s Statements of Operations, the Commission separately identifies certain non-cash elements of the reported operating revenues and operating expenses. The Commission adjusts operating expenses to exclude the payment to the Postal Service Retiree Health Benefits Fund (RHBF), the supplemental contribution to the Federal Employees Retirement System (FERS) annuity, and the adjustments to the workers’ compensation liability. These adjustments are properly recognized as accrual entries in the Postal Service’s financial statements and have been disaggregated by the Commission to provide an in-depth analysis of the financial results for FY 2015. Table II-1 illustrates the Commission’s disaggregation of the Postal Service’s Statements of Operations. Table II-1 Postal Service Statements of Operations Disaggregated to Facilitate Analysis FY 2015 and FY 2014 ($ in Millions) The Postal Service recorded total net operating income of almost $1.2 billion in FY 2015. This figure is $0.2 billion lower than the $1.4 billion net operating income reported in FY 2014. In FY 2015, total revenues increased by $1.1 billion while operating expenses increased by $0.6 billion. The increase in revenues was primarily due to the continuance of the exigent surcharge on Market Dominant products, price increases for both Market Dominant and Competitive products implemented in May 2015, and increased volume of Competitive products. The increase in operating expenses was primarily the result of higher compensation outlays. After accounting for the non-cash adjustment to the workers’ compensation liability and the RHBF payment, the Postal Service had a total net loss of $5.1 billion in FY 2015. This amount is $0.4 billion less than the total net loss in FY 2014. The improved net loss figure is primarily the result of a lower non-cash adjustment to the workers’ compensation liability. Current Revenues Compared to Prior Fiscal Year This section presents an overview of revenues for Market Dominant and Competitive products. A more detailed discussion of the revenues generated by Market Dominant and Competitive products appears in Chapter 3. CURRENT MARKET DOMINANT REVENUES COMPARED TO PRIOR FISCAL YEAR Table II-2 disaggregates FY 2015 and FY 2014 Market Dominant revenues by class. Table II-2
will be required to fund the RHBF with payments consisting of the normal cost, as determined by OPM, and any unfunded portion of the RHBF liability amortized over 40 years. The RHBF will then pay the government share of postal retiree health benefit premiums. With this change, the Postal Service will no longer be required to pay the annual government share of retiree health benefit premiums. Table II-19 on the next page shows the funded status of the RHBF, including the assets and liabilities, as determined by OPM. Table II-19 Retiree Health Benefit Fund Status ($ in Billions) As the table above shows, the Postal Service had an unfunded liability of $54.8 billion at the end of FY 2015. Over the last 5 years, the Postal Service has not paid the statutorily scheduled payments into the RHBF. Through FY 2015, the Postal Service missed a total of $28.1 billion in payments. This sum is reported on the Postal Service’s Balance Sheets as a current liability, contributing significantly to its negative working capital. The statutory payment due for FY 2016 is $5.8 billion; however, the Postal Service represented that there will be no resources available to make that payment into the RHBF. Analysis of Statement of Cash Flows At the end of FY 2015, the Postal Service’s cash and cash equivalents totaled $6.6 billion, $1.7 billion higher than in FY 2014. With an average daily cash requirement of $275 million, this balance represents 24 days of operating cash, an increase of 5 days from the end of FY 2014. Table II-20 compares the Postal Service’s cash flow from FY 2007 to FY 2015. Table II-20 Postal Service Cash Flow, FY 2015 - FY 2007 ($ in Millions) The Postal Service reached its statutory borrowing limit in FY 2012. This includes a revolving credit line of $3.4 billion and an overnight line of $600 million. As of September 30, 2015, the Postal Service’s fixed interest rate obligations consist of fixed rate borrowings from the Federal Financing Bank of $10.1 billion, which are due within 1 year. Table II-21 illustrates the current liquidity position of the Postal Service. Since the
Table III-15 Standard Mail Letters Attributable Cost and Average Unit Attributable Cost TRENDS IN STANDARD MAIL LETTERS As shown in Figure III-12, Standard Mail Letters volume declined in FY 2015 after 2 years of minimal growth. The rate of growth of High Density and Saturation Letters volume increased each year since FY 2012 and consistently exceeded the rate of growth of Standard Mail Letters. Figure III-12 Standard Mail Letters Volume Percent Change As shown in Figure III-13, the average unit attributable cost for Standard Mail Letters increased since FY 2008 but remained relatively stable since FY 2009. FY 2015 unit attributable cost for High Density and Saturation Letters rose significantly. As noted earlier, this increase is primarily driven by increases in delivery cost. Figure III-13 Standard Mail Letters Unit Attributable Cost STANDARD MAIL FLATS COMPARED WITH FY 2014 Table III-16 summarizes the FY 2015 changes in volume and revenue for flat-shaped Standard Mail. Volume declined for every category except for Flats, which increased 4.1 percent over last year. The largest decline in volume was in Carrier Route Flats, which declined 7.1 percent. Total revenue for flat-shaped Standard Mail decreased in FY 2015 despite the rate increase that was implemented in May 2015. The decrease in Carrier Route Flats volume accounted for the entirety of the flats revenue decline, more than offsetting slight increases in revenue from Standard Mail Flats and Standard Mail High Density and Saturation Flats/Parcels.