US Postal Service reports fiscal year 2016 Q3 results

The US Postal Service reported operating revenue of $16.6bn for the third quarter of fiscal year 2016 (April 1, 2016 – June 30, 2016), an increase of $117m, or 0.7%, over the same period last year. Nevertheless, the Postal Service suffered a loss for the quarter, in both gross and net terms.

The Shipping and Packages business saw revenue growth of $645m, or 18%. This was offset by a decline in First-Class Mail revenue of $379m, or 5.5 %, due largely to the expiration of the exigent surcharge. The expiration of the surcharge will reduce revenue by an additional amount of approximately $500m for the fourth quarter and by almost $2bn 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 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 net loss for the quarter was $1.6bn, an increase of $981m compared to the same period last year. The increase was most significantly impacted by a $1.6bn unfavourable change in workers’ compensation expense as a result of interest rate changes, offset by the $1.1bn 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, labour costs increased by $387m, largely due to the increase in Shipping and Packages volume, and transportation costs increased by $97m.

“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.”

Source: United States Postal Service