- Operating revenue grew 4.7 percent to $17.7 billion
- Controllable income totaled $576 million; net loss of $2.0 billion reported
- Postal Service revenue benefited from exigent surcharge, which expired on April 10, 2016
- Legislative reform and focus on innovation and efficiency remain necessary
WASHINGTON — The U.S. Postal Service reported operating revenue of $17.7 billion for the second quarter of fiscal year 2016 (January 1, 2016 – March 31, 2016), an increase of $788 million or 4.7 percent over the same period last year. The increase was primarily due to an 11.4 percent increase in Shipping and Package volume and pricing strategies.
“While we have been successful in achieving controllable income during the quarter, we are still reporting net losses and contending with long-term financial challenges,” said Postmaster General and Chief Executive Officer Megan J. Brennan. “We continue to focus on improving operating efficiencies, speeding the pace of innovation, and increasing revenues for the Postal Service.”
Controllable income for the quarter was $576 million compared to $313 million for the same period last year. Calculation of controllable income takes into account the impact of operational expenses including compensation, benefits and work hours; but does not reflect factors such as the legally-mandated expense to prefund retiree health benefits (see Non-GAAP Financial Measures table on following page for full description).
Net loss for the quarter was $2.0 billion compared to $1.5 billion for the same period last year. The change in net loss was most significantly impacted by a $547 million unfavorable change in the workers’ compensation expense as a result of interest rate changes – a factor outside of management’s control.
Operating expenses also increased in the second quarter compared to the same period last year, driven by increased work hours and transportation expenses due in large part to the increase in package volume. Labor costs increased by $362 million, and transportation expense increased by approximately $149 million.
“During the second quarter, we expanded work hours and our transportation network, taking more trips and increasing miles flown,” said Chief Financial Officer and Executive Vice President Joseph Corbett. “This largely resulted from strategic business decisions enacted to accommodate package growth and enhance service across the country.”
“I am grateful to our dedicated employees who helped us to achieve controllable income this quarter, but we cannot let this result mask the financial challenges we face,” said Brennan. “Our financial situation is serious, but solvable. We are confident that we can return to financial stability through the enactment of prudent legislative reform and a favorable resolution of the upcoming regulatory review of our rate-setting system.”
Selected Second Quarter 2016 Results of Operations Compared to Same Period Last Year
The following table presents certain selected results of operations for the three months ended March 31, 2016 and 2015:
| (volume results in millions of pieces; financial results in $ millions) |
2016* |
2015 |
% |
|||||||||
| Volume | ||||||||||||
| Standard Mail |
19,464 |
19,102 |
1.9 |
% |
||||||||
| First-Class Mail |
15,927 |
15,822 |
0.7 |
% |
||||||||
| Periodicals |
1,366 |
1,447 |
(5.6 |
)% |
||||||||
| Shipping and Packages |
1,227 |
1,101 |
11.4 |
% |
||||||||
| International |
245 |
231 |
6.1 |
% |
||||||||
| Other |
71 |
76 |
(6.6 |
)% |
||||||||
| Total volume |
38,300 |
37,779 |
1.4 |
% |
||||||||
| Operating revenue and expenses | ||||||||||||
| Operating revenue (excluding temporary exigent surcharge) | $ |
17,215 |
$ |
16,423 |
4.8 |
% |
||||||
| Temporary exigent surcharge |
519 |
523 |
(0.8 |
)% |
||||||||
| Total operating revenue | $ |
17,734 |
$ |
16,946 |
4.7 |
% |
||||||
| Operating expenses | $ |
19,760 |
$ |
18,399 |
7.4 |
% |
||||||
| Net loss | $ |
(2,040 |
) | $ |
(1,469 |
) |
38.9 |
% |
||||
| Workers’ compensation expense | ||||||||||||
| Impact of discount rate changes | $ |
948 |
$ |
401 |
136.4 |
% |
||||||
| Actuarial valuation of new cases and revaluation of existing cases |
488 |
287 |
70.0 |
% |
||||||||
| Administrative fee |
18 |
18 |
— |
% |
||||||||
| Total workers’ compensation expense | $ |
1,454 |
$ |
706 |
105.9 |
% |
||||||
| * The three months ended March 31, 2016 had one additional business day compared to the same period in 2015. | ||||||||||||
Non-GAAP Financial Measures
Included in this news release is controllable income, which is not calculated and presented in accordance with accounting principles generally accepted in the United States (GAAP). Controllable income is a non-GAAP financial measure defined as net income subtracting operating expenses considered outside of management’s control. These expenses include the mandated prefunding of retirement health benefits, actuarial revaluation of retirement liabilities and non-cash workers’ compensation adjustments.
The following table reconciles GAAP net loss to controllable income and illustrates the income from ongoing business activities without the impact of non-controllable items for the three months ended March 31, 2016 and 2015:
| (in $ millions) |
2016 |
2015 |
|||||||
| Net loss | $ |
(2,040 |
) | $ |
(1,469 |
) | |||
| Impact of: | |||||||||
| PSRHBF prefunding expense |
1,450 |
1,425 |
|||||||
| Change in workers’ compensation liability due to fluctuations in discount rates |
948 |
401 |
|||||||
| Other change in workers’ compensation liability1 |
158 |
(44 |
) | ||||||
| Actuarial revaluation of retirement liability2 |
60 |
— |
|||||||
| Controllable income | $ |
576 |
$ |
313 |
|||||
| 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/who-we-are/financials/welcome.htm.
However,USPS actually stopped making such pre-fund”future retiree health benefits payments”in 2011. So does USPS currently have $2 Billion in(saved) assets somewhere?Or r they,as of the second-quarter of 2016,still $1.8 Billion in hock? Is anybody,able 2 figure this out? I also question whether first-class and standard letter-sized mail volume,actually increased? Perhaps,it’s a matter of double-processing such letters in two different mail-processing facilities;due 2 facility overflow?
if Postmaster General Brennan was really interested in Innovation she would be lobbying Congress for postal banking… thats a gold mine right there.
And CFO Corbett eschewing “strategic business decisions”….please don’t insult our intelligence!!…you’re a laughingstock in the private sector!
would like one of the Big 8 Accounting Firms to audit the Post Office…….I do not trust these people as far as I can throw them. like letting the fox count the chicks in the hen house!
More PFP to me even though I don’t have anything that would qualifies as performance.
It is time to force congress to pre fund their health care costs. If ex President Forrest Gump and congress can insist that the Postal Service must pre pay health care costs, then congress must do the same for themselves! Congress must show a profit from operations. Time has come for them to make money, not have fun! Never ask a man to do what you are unwilling to do. However, they only want to live the life of the rich and lazy!