- Net 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
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."