SOURCE: U.S. Postal Service

U.S. Postal Service

February 09, 2016 08:30 ET

U.S. Postal Service Reports Fiscal Year 2016 First Quarter Results

WASHINGTON, DC--(Marketwired - February 09, 2016) -

  • Operating revenue grew 3.3 percent to $19.3 billion
  • Controllable income totaled $1.3 billion; net income of $307 million reported
  • Postal Service benefited from exigent surcharge, which is expected to expire in April
  • Legislative reform and careful focus on cost containment remain necessary 

The U.S. Postal Service reported operating revenue of $19.3 billion for the first quarter of fiscal year 2016 (October 1, 2015 - December 31, 2015), an increase of $613 million or 3.3 percent over the same period last year. The increase was driven by the record volume of packages delivered during the 2015 holiday season. The first quarter is typically the strongest quarter of the fiscal year for the Postal Service.

"Shipping and Package revenue grew 13.5 percent over the same period last year, and was particularly strong during the holiday shipping season. We projected and delivered more than a 16 percent increase in package volume," said Postmaster General and Chief Executive Officer Megan J. Brennan. "We continue to grow our e-commerce business and remain focused on delivering the best value for our customers."

"Despite these achievements and the best efforts of our employees, our financial condition will worsen without legislative reform," said Brennan. "Our financial situation is serious but solvable through the enactment of prudent legislative reform."

Controllable income for the quarter was $1.3 billion compared to $1.1 billion 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 below for full description).

Net income for the quarter was $307 million, a change of $1.1 billion from the net loss of $754 million for the same period last year. The change in net income was most significantly impacted by a $1.2 billion favorable change in the workers' compensation expense as a result of interest rate changes -- a factor outside of management's control.

"While net income is favorable compared to a net loss, it unfortunately does not reflect the end of our losses," said Chief Financial Officer and Executive Vice President Joseph Corbett. "Excluding the favorable impact of interest rate changes and the exigent surcharge, the organization would have actually reported a net loss of approximately $700 million in the first quarter. Absent legislative reform, the exigent surcharge is expected to roll back in April, and our losses will increase by approximately $2 billion per year."

Selected First 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 December 31, 2015 and 2014:

                       
(volume results in millions of pieces; financial results in $ millions) 2015     2014     Change     %  
                             
Volume                            
  Standard Mail   22,092       22,767       (675 )   (3.0 )%
  First-Class Mail   16,402       16,770       (368 )   (2.2 )%
  Periodicals   1,455       1,507       (52 )   (3.5 )%
  Shipping and Packages   1,447       1,245       202     16.2 %
  International   302       273       29     10.6 %
  Other   190       158       32     20.3 %
Total volume   41,888       42,720       (832 )   (1.9 ) %
                             
Operating revenue and expenses                            
  Operating revenue (excluding temporary exigent surcharge) $ 18,774     $ 18,148     $ 626     3.4 %
  Temporary exigent surcharge   573       586       (13 )   (2.2 )%
Total operating revenue $ 19,347     $ 18,734     $ 613     3.3 %
                             
Operating expenses $ 19,002     $ 19,475     $ (473 )   (2.4 ) %
                             
Workers' compensation expense                            
  Impact of discount rate changes $ (402 )   $ 816     $ (1,218 )   (149.3 )%
  Actuarial valuation of new cases and revaluation of existing cases   188       (47 )     235     (500.0 )%
  Administrative fee   18       17       1     5.9 %
Total workers' compensation expense $ (196 )   $ 786     $ (982 )   (124.9 ) %
                             

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) within the meaning of applicable SEC rules. 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 income (loss) to controllable income and illustrates the income from ongoing business activities without the impact of non-controllable items for the three months ended December 31, 2015 and 2014:

           
(in $ millions) 2015     2014  
               
Net income (loss) $ 307     $ (754 )
Impact of:              
  PSRHBF prefunding expense   1,450       1,425  
  Change in workers' compensation liability due to fluctuations in discount rates   (402 )     816  
  Other change in workers' compensation liability1   (158 )     (363 )
  Actuarial revaluation of retirement liability   60       -  
               
Controllable income $ 1,257     $ 1,124  
               
1 This is a net amount that includes changes in assumptions as well as the valuation of new claims and revaluation of existing claims.  
               

Complete financial results are available in the Form 10-Q, available at http://about.usps.com/who-we-are/financials/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 10:00 am on February 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 www.webex.com/lp/jointest/

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

Conference ID: 42570997

Attendee Direct URL: https://usps.webex.com/usps/onstage/g.php?MTID=eb740828eeaddaa7f20827ffb3e11ee93

If you cannot join using the direct link above, please use the alternate logins below:

Alternate URL: https://usps.webex.com

Event Number: 992 721 285

The briefing will also be available on live audio webcast (listen only) at:

http://about.usps.com/news/electronic-press-kits/cfo/welcome.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.

Please Note: For broadcast quality video and audio, photo stills and other media resources, visit the USPS Newsroom at about.usps.com/news/welcome.htm. A complete list of the holiday shipping deadlines can be found at usps.com/holidaynews.

For reporters interested in speaking with a regional Postal Service public relations professional, please go to about.usps.com/news/media-contacts/usps-local-media-contacts.pdf. Follow us on Twitter (twitter.com/usps), Instagram (instagram.com/uspostalservice), Pinterest (pinterest.com/uspsstamps), LinkedIn (linkedin.com/company/usps), subscribe to our channel on YouTube (youtube.com/usps), like us on Facebook (facebook.com/usps) and view our Postal Posts blog (uspsblog.com).

For more information about the Postal Service, visit usps.com and usps.com/postalfacts.

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