U.S. Postal Service Reports $2 Billion Net Loss for Q2, Despite 4.7 Percent Revenue Gains
The U.S. Postal Service (USPS) reported operating revenue of $17.7 billion for the second quarter of fiscal year 2016 (Jan. 1 to 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 CEO Megan 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.
Net loss for the quarter was $2 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 Joseph Corbett, USPS’ chief financial officer and executive vice president. “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,” added 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: