USPS reports $552 million net loss without prefunding for FY 2016 Third Quarter

  • spacerNet loss for quarter of $1.6 billion
  • Continued double-digit growth in revenue and volume in the Shipping and Packages business
  • Enactment of postal reform legislation remains urgently needed

uspshq2

WASHINGTON — Excluding a change in accounting estimate recorded during the quarter, the U.S. Postal Service reported operating revenue of $16.6 billion for the third quarter of fiscal year 2016 (April 1, 2016 – June 30, 2016), an increase of $117 million, or 0.7 percent, over the same period last year (See Selected Third Quarter 2016 Results of Operations table below). Nevertheless, the Postal Service suffered both a controllable loss (defined below) and a net loss for the quarter. In addition, the Postal Service’s revenues were approximately $450 million less than they otherwise would have been during the quarter because of the expiration of the exigent surcharge on April 10, 2016.

The Shipping and Packages business continued its strong performance with revenue growth of $645 million, or 18 percent. This was offset by a decline in First-Class Mail revenue of $379 million, or 5.5 percent, due largely to the expiration of the exigent surcharge. The expiration of the surcharge will reduce revenue by an additional amount of approximately $500 million for the fourth quarter and by almost $2 billion annually.

“We continue to post double-digit gains in package volume and are well-positioned operationally for further growth. Our capital investments are enabling increased efficiencies across the enterprise and improving experiences for our customers,” said Postmaster General and CEO Megan J. Brennan. “Despite the encouraging numbers, net losses continue to mount. Our results in the quarter further underscore the need for legislative reform that provides the organization with greater financial stability.”

The controllable loss for the quarter was $552 million compared to a controllable loss of $197 million for the same period last year. Calculation of controllable loss takes into account the impact of operational expenses including compensation and benefits; but does not reflect factors such as the legally-mandated expense to prefund retiree health benefits or the change in accounting estimate noted above (see Controllable Income (Loss) below for a full description).

The net loss for the quarter was $1.6 billion, an increase of $981 million compared to the same period last year. The increase was most significantly impacted by a $1.6 billion unfavorable change in workers’ compensation expense as a result of interest rate changes, offset by the $1.1 billion change in accounting estimate.

Operating expenses increased in the third quarter compared to the same period last year. In addition to the increase in workers’ compensation expense, labor costs increased by $387 million, largely due to the increase in Shipping and Packages volume, and transportation costs increased by $97 million.

“Although the Postal Service achieved strong results in package delivery and Standard Mail volumes, only a slight increase in total revenue was recorded due to a mandated price reduction earlier this year,” said Chief Financial Officer and Executive Vice President Joseph Corbett.  “We incurred a net loss resulting, in part, from continued decreases in First-Class Mail volume and systemic financial imbalances associated with our retiree health benefit prefunding requirements.”

 

Third Quarter 2016 Volume by Service Category Compared to Same Period Last Year
The following presents volume by service category for the three months ended June 30, 2016 and 2015:

               
  (in millions of pieces)

2016

 

2015

 

%

 
               
  Volume            
  Standard Mail

19,115

   

18,790

   

1.7

%

 
  First-Class Mail

14,624

   

15,133

   

(3.4

)%

 
  Periodicals

1,428

   

1,485

   

(3.8

)%

 
  Shipping and Packages

1,220

   

1,074

   

13.6

%

 
  International

229

   

218

   

5.0

%

 
  Other

117

   

95

   

23.2

%

 
  Total volume

36,733

   

36,795

   

(0.2

)%

 
               

 

Selected Third Quarter 2016 Results of Operations and Change in Accounting Estimate
During the three months ended June 30, 2016, the Postal Service revised the estimation technique utilized to determine its Deferred revenue-prepaid postage liability for a series of postage stamps. The change resulted from new information regarding customers’ retention and usage habits of Forever Stamps, and enabled the Postal Service to update its estimate of usage and “breakage” (representing stamps that will never be used for mailing due to loss, damage or stamp collection).

As a result of this change in estimate, the Postal Service recorded a decrease in its Deferred revenue-prepaid postage liability as of June 30, 2016, which caused an increase in revenue and decrease in net loss of $1.1 billion for the three months ended June 30, 2016. This change in accounting estimate resulted in a non-cash adjustment that does not impact the Postal Service’s available cash or access to cash and does not affect its controllable loss.

This news release references operating revenue before the change in accounting estimate and operating revenue before the temporary exigent surcharge, which are not calculated and presented in accordance with accounting principles generally accepted in the United States (GAAP). The following reconciles these non-GAAP operating revenue calculations with GAAP net loss for the three months ended June 30, 2016, and 2015:

               
  (results in $ millions)

2016

 

2015

 

%

 
               
  Operating revenue            
  Operating revenue before temporary exigent surcharge $

16,590

    $

16,015

   

3.6

%

 
  Temporary exigent surcharge1

47

   

505

   

(90.7

)%

 
  Operating revenue after exigent surcharge before change in accounting estimate $

16,637

    $

16,520

   

0.7

%

 
  Change in accounting estimate2

1,061

   

   

100.0

%

 
  Total operating revenue $

17,698

    $

16,520

   

7.1

%

 
  Other revenue

20

   

35

   

(42.9

)%

 
  Total revenue $

17,718

    $

16,555

   

7.0

%

 
               
  Operating expenses $

19,224

    $

17,101

   

12.4

%

 
  Other interest (income) expense, net

61

   

40

   

52.5

%

 
  Total expenses $

19,285

    $

17,141

   

12.5

%

 
               
  Net loss $

(1,567

)   $

(586

)  

167.4

%

 
               
  1 The temporary exigent surcharge expired on April 10, 2016.  
  2 The Postal Service recognizes revenue for postage when a piece of mail is processed and delivered, not at the time a stamp is sold and cash is received. To reflect the difference in revenue and cash received, management estimates the amount of postage stamps sold but not yet used and this amount is recorded as a deferred revenue-prepaid postage liability.  This update relates solely to changes in estimates of consumer behavior and, in accordance with GAAP, the adjustment is considered a change in accounting estimate.  
               

 

Controllable Income (Loss)
This news release references a controllable loss, which is not calculated and presented in accordance with GAAP. Controllable income (loss) is a non-GAAP financial measure defined as net income (loss) adjusted for items outside of management’s control and non-recurring items. These adjustments include the mandated prefunding of retirement health benefits, actuarial revaluation of retirement liabilities, non-cash workers’ compensation adjustments and the change in accounting estimate.

The following reconciles GAAP net loss to controllable loss and illustrates the loss from ongoing business activities without the impact of non-controllable and non-recurring items for the three months ended June 30, 2016 and 2015:

           
  (in $ millions)

2016

 

2015

 
           
  Net loss $

(1,567

)   $

(586

)  
           
  PSRHBF prefunding expense

1,450

   

1,425

   
  Change in workers’ compensation liability due to fluctuations in discount rates

668

   

(950

)  
  Other change in workers’ compensation liability1

(102

)  

(86

)  
  Actuarial revaluation of retirement liability2

60

   

   
  Change in accounting estimate

(1,061

)  

   
           
  Controllable loss $

(552

)   $

(197

)  
           
  1 This is a net amount that includes changes in assumptions as well as the valuation of new claims and revaluation of existing claims.  
  2 Determined by OPM in 2015 to amortize the $3.5 billion unfunded FERS retirement obligation based on actuarial valuations and assumptions. The payments are to be made in equal installments over the next 30 years. The 2015 expense of $241 million was recorded in full during the fourth quarter of 2015.  
           

 

Complete financial results are available in the Form 10-Q, available at http://about.usps.com/news/electronic-press-kits/cfo/welcome.htm.

Financial Briefing
Postmaster General and CEO Megan J. Brennan and Chief Financial Officer and Executive Vice President Joseph Corbett will host a telephone/Web conference call to discuss the financial results in more detail. The call will begin at 9:00 am on August 9, 2016 ET and is open to news media and all other interested parties.

How to Participate:

Important Notice: To ensure your computer is set up to join the event, click on the link: Join Test Meeting

US/Canada Attendee Dial-in: 855-293-5496

Conference ID:  50364089

Attendee Direct URL: https://usps.webex.com/usps/onstage/g.php?MTID=e27d1d175d81115ce66c680f7346dd5e6

If you cannot join using the direct link above, please use the alternate logins below:
Alternate URL: https://usps.webex.com
Event Number: 994 695 231

The briefing will also be available on live audio webcast (listen only) at:
http://about.usps.com/media-player/uspstv/live-feed.htm

The Postal Service receives no tax dollars for operating expenses and relies on the sale of postage, products and services to fund its operations.

14 thoughts on “USPS reports $552 million net loss without prefunding for FY 2016 Third Quarter

  1. Run to fail, fabricated losses, rampant corruption and gross mismanagement by way too many Bureaucrats and Managers….enuff said.

  2. I have never seen such things going on in my life. There is no business that remains
    without making money. I do not believe that there is one Postal Worker who could
    honestly say that they don’t know several people at the Post Office that are brain
    dead. They are there for a pay check, but their customers, and co workers don’t
    matter. I had to laugh at how stupid this Clerk that has worked at the same office
    for several years was. A customer wanted a 1000 dollar. She gave him a money
    order with all zeros. I can see making a mistake if you are working, but this gal is
    so lazy, and rude . The Post Office can not spare customers . There too many other
    places.

  3. Why not require every organization in America that has employees to pre fund their health care costs? Since every organization must make a profit, then our government must insist that ,when we are at war, the Army and Navy must make a profit! Why not force other nations to pay the U. S. when we finish the war? Remember, if it doesn’t make a profit, it’s evil! It is also time to bill people when they call for the police and fire services. And don’t forget to bill parents for public education. Why should the children be freeloaders?

  4. over $95 Billion loss since 2009….stopped prefunding to govt in 2009……..red ink to the moon………vehicle fleet rusty/dirty/broken………..just lost 1.6 Billion this 1/4. UPS/FDX/Others in the money. 99% of PO MISMGT no college/university/business experience…..notice the trend. sweep po mismgt out to the street! then we will produce income.

    • Once the last two union contracts are finalized either through negotiation or arbitration, they will be reporting profits again and the big bonus’s will coming again for overpaid management.

  5. Fact that are,that USPS stopped making the U.S.Congressionally mandated”prefunding payments”,at end of 2011. And the U.S.Congress,along with President Obama,has refused to take the necessary actions,to fill vacant Postal; Board of Governors seats. Currently,eight out of nine these;remain continously vacant. So,a distorted moral sense of equal it continues,as USPS and our Federal Government, equally ignore the LAW. And there no doubt,that the USPS management higher-ups and,even the USPS various workers unions higher-ups;benefit from these continued stalements. Any workable USPS reform,requires sacrifices from ALL USPS personnel.

    • Obama only has appointed right wing Republican hacks to the BOG who have long advocated privatization and will not provide any necessary oversight as Megan and her cohorts continue to push Donahoe’s initiatives to degrade service and set it up for privatization.Bernie Sanders had to block the nominations to keep it from happening.

  6. How bout some of that 800 Million dollar profit Amazon just posted..Congressional Reps have requested figures on how much cost does the Agency incur due to the deals with FedEx/UPS/Amazon?…The Agency’s answer:..look at how much parcel volume we have!!. .so why then is the USPS the only company in the equation that is….LOSING MONEY!!..

  7. Why won’t these incompetent inbred cast of clowns at LeEnfant Plaza implement postal banking?

    These clowns with their worthless online degrees would rather sit on their fat asses and run this place in the ground, then try to introduce new services and products that would turn a profit.

    They’re not held accountable as these clowns are allowed to lose billions and still have a job the next day. Their management ranks have the highest ratio of manager to worker than any organization on the planet..and these clowns have the audacity to put themselves on LinkedIn pages along with their phony online degrees. Newsflash!! You’re LinkedIn pages are laughed at and you have no shot at getting a job outside of your bankrupt Postal Service!

  8. Why not get rid of overpaid and useless management, that would save over a couple billion dollers

  9. Lol. Spin and turn numbers anyway you want. Stop giving OT like it’s candy due to stupid management decisions. Rolando what’s your response this time? Blame only the prefunding again that expires next month anyway? How about “we need postal reform now” just like you said in 2010. I laugh everytime I read this stuff because nothing changes.

  10. Apparently it will take another law to overturn the prefunding ripoff that only the USPS has to pony up. This was the present of lame duck George W. Bush to create a cash cow for his buddies to dip their filthy beaks in. It is just criminal to make the Service pay for a retirement health system that already has enough to last for 80 years or longer.
    Congress has been dicking around and ignoring the USPS concerning this skim operation, yet are demanding as hell when services are cut and limited. On that issue, the USPS has no business closing plants or reducing service standards, that much is correct. But Congress is refusing to acknowledge that overturning the retirement prepay program would allow for better service and avoid plant consolidations in the future. Perhaps more carriers could be hired nationwide to insure people got their mail before 8:00 or later in the evening and the crippled rust bucket LLV fleet could be replaced sooner.
    But as usual in Washington, there are always other considerations that take precedence: payoffs, bribes, dirty deals, nepotism, and who knows what else that take away attention from what needs to be done besides worthless speeches. But again, I’m just a little fish in a pond full of hungry sharks who don’t give a shit what I or thousands of other postal workers think.

  11. First they don’t want to make a profit.
    Second, no company in the world has this many salaried employees
    that do nothing at all.
    Other day in an office at 4PM, mail is out for delivery, 4 salaried employees
    sitting around laughing.
    If you work at a PO you all the problem.

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