USPS 3Q report shows year to date profit of $1 billion before PAEA charges

The US Postal Service has made a profit of over a billion dollars so far this fiscal year, according to a report issued today. Thanks to the PAEA law, however, the agency will report a $2 billion loss for the third quarter, all of it attributable to accounting entries mandated by Congress, not actual operations. Without the PAEA required “trust fund” payments (that will not actually be paid), and “non-cash” revaluation of future workers comp costs, the service showed a $10 million profit for the three month period ending June 30, and a $1.005 billion profit for the year to date. That compares very favorably with a $368 million loss for the same period last year (SPLY).

Including the PAEA “paper” adjustments makes the postal service’s financial situation look pretty awful, so it’s used by politicians and the news media, as well as postal management in arguing for drastic measures to cut services as well as wages and benefits for employees. Here, for example, is how the USPS reported today’s results to its own employees:

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The News Link article makes no mention of the $4.3 billion year to date “trust fund” charge, even though it accounts for the entire year to date loss. The very last paragraph of the story, however, says “[USPS CFO Joe] Corbett also said that the organization will be unable to make the required $5.7 billion retiree health benefit prefunding payment to the U.S. Treasury, due by Sept. 30”, implying that the payment is in addition to the reported “loss”, when it isn’t.

But while USPS management wants you to believe that the “loss” is real, they don’t want you to think it’s their fault:

Because the legislative mandates for the PSRHBF prefunding of retiree health benefits and the participation in the FECA are not subject to management’s control, we believe that analyzing operating results without the impact of these charges provides a more meaningful insight into current operations. [emphasis added] In the day-to-day operation of our business, we exclude these items from our internal financial analyses in order to direct focus upon relevant expenses that management can control and include only those workers’ compensation costs representing current year payments on behalf of postal claimants. The following table illustrates the net income or loss for the three and nine month periods ended June 30, 2014 and 2013 from ongoing business activities when these charges are not considered, and reconciles this amount to our GAAP net loss.

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Revenue from first class mail was up 3.2% for the quarter compared with SPLY, even though volume was down 1.4%. Standard mail generated 51.3% of total mail volume, but just 25.5% of revenue. Shipping and packages revenue is up almost 10% year to date, and now accounts for 20% of postal revenue, but just 2.6% of volume.

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Financials.

  • Don Cheney

    First-Class Mail users continue to pay way more toward institutional overhead than Standard Mail users, although the two mail streams are being merged. How is this justified?

  • Mr.Guest

    Clearly means management at the top will get a big payoff from the big mailers after they retire and collect their golden parachutes.

  • Old sack

    Can we get one of those raises now? Maybe one of those cola’s we been cheated out of?

  • jim

    parcels is the only profitable sector, standard and first class no growth

  • freddie

    Any high school bookkeeping text book will tell you that operating profit is NOT profit. The USPS, like just about every other business, uses accrual accounting, which means accumulated charges such as retiree health care and workers comp are expenses against revenues even if they aren’t paid out until years later. This is Basic Accounting 101. The USPS is not currently profitable. Please stop reporting disinformation.

  • postalnews

    Just one obvious flaw in your little lesson- the trust fund charges are NOT “accumulated charges”. They were arbitrarily set in PAEA. They exist only because Congress declared them to exist. I suppose you think “accumulated charges” and “Basic Accounting 101” miraculously appeared in 2006?

    That the USPS takes in more in revenue than it spends on operations is a simple undeniable fact. The USPS recognizes the trust fund charges on paper NOT because of an actual future liability, but because Congress and George W. Bush enacted a law requiring it to do so. That is also a fact.

    Of course, if you really believe what you state in your comment, you should probably notify the OIG, because the 10Q filed yesterday clearly states that the USPS only recognizes the arbitrary annual charge because it is required to by PAEA, not because it represents an actual calculated accrual. If you’re correct, they must be lying, right?

  • common sense

    How do you figure? The “big mailers” use the most first class mail too. And anyway, I keep hearing that the US has the cheapest first class rates in the world, so where’s the problem? You think people will suddenly start sending tons of letters if you drop the price a few pennies?

    Dream on!