U.S. Postal Service Second Quarter Fiscal 2020 Results – Another Big Loss

USPS

The U.S. Postal Service reported total revenue of $17.8 billion for the second quarter of fiscal 2020 (January 1, 2020 – March 31, 2020), an increase of $348 million, compared to the same period last year.

The COVID-19 pandemic, which has severely affected the U.S. economy, began to negatively affect the Postal Service during late March with declining mail volume, and the impact has continued to worsen since then.

It is estimated that the COVID-19 pandemic will substantially increase the Postal Service’s net operating loss over the next eighteen months, threatening the Postal Service’s ability to operate.

However, since the Postal Service began experiencing the impacts of the pandemic in mid-March, the pandemic did not have a material impact on its second-quarter results, although significant impacts are expected for the remainder of the year.

U.S. Postal Service Financials

Compared to the same quarter last year, First-Class Mail revenue increased by $89 million, or 1.4 percent, despite a volume decline of 29 million pieces, or 0.2 percent.

This growth was due to one-time mailings associated with the 2020 U.S. Census, otherwise, First-Class Mail revenue and volume would have each declined.

Marketing Mail revenue declined by $94 million, or 2.5 percent, on a volume decline of 604 million pieces, or 3.4 percent.

Secular declines in mail have continued to negatively affect mail revenue and volume, and the Postal Service believes those declines will be exacerbated by the effects of the COVID-19 pandemic.

Meanwhile, Shipping and Packages revenue increased by $386 million, or 7.1 percent, on a volume increase of 12 million pieces, or 0.8 percent, compared to the same quarter last year.

In the near term, the Postal Service anticipates that these trends will accelerate as the nation experiences a surge in ecommerce as a result of quarantines, shelter-in-place orders and travel and logistics restrictions in connection with the COVID-19 pandemic.

The Postal Service has and will continue to serve its customers during this crisis through the delivery of medicine, essential consumer staples, benefits checks, and important information, but does not expect its package revenue growth over the medium to long term to offset its losses in mail service revenue caused by COVID-19.

Total operating expenses were $22.3 billion for the quarter, an increase of $2.8 billion, or 14.2 percent, compared to the same quarter last year.

Workers’ compensation increased by $2.2 billion due to a significant decline in interest rates as the COVID-19 pandemic weighed on the U.S. economy.

Excluding costs associated with discount rate changes, actuarial revaluation, and amortization of unfunded liabilities, which are outside of management’s control, expenses increased by $328 million, or 1.8 percent, compared to the same quarter last year.

Losses Require Congressional Overhaul

The net loss for the quarter was $4.5 billion compared to a net loss of $2.1 billion for the same quarter last year. Controllable loss for the quarter was $792 million, a slight decrease compared to the controllable loss of $806 million reported for the same quarter last year.

“We are unable to predict the duration of COVID-19 business closures and the duration of the recession we are currently experiencing; however, this situation will materially damage our financial condition. While we continue to conserve capital and reduce expenses in areas where volumes are declining, our ability to continue to serve the nation will require substantial funding from the federal government or other sources.”

 

Chief Financial Officer Joseph Corbett

While this quarter had minimal impact from the COVID-19 crisis, the next quarter will likely show a significantly larger loss, threatening USPS financial liquidity unless Congress acts soon.

Time is running out for Congress and the Administration to solve the USPS financial crisis which if left unsolved, will impact millions of small businesses that rely on the mail service to provide shipping and mail services.

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