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Financial Matters: 2011 Financial Results Board of Governors’ Open Session November 15, 2011

Financial Matters: 2011 Financial Results Board of Governors’ Open Session November 15, 2011 Joe Corbett Chief Financial Officer & Executive Vice President. Financial Results. * Before RHB Pre-Funding, Non-Cash Adjustments to Workers’ Compensation Liabilities & Contingency.

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Financial Matters: 2011 Financial Results Board of Governors’ Open Session November 15, 2011

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  1. Financial Matters: 2011 Financial Results Board of Governors’ Open Session November 15, 2011 Joe Corbett Chief Financial Officer & Executive Vice President

  2. Financial Results * Before RHB Pre-Funding, Non-Cash Adjustments to Workers’ Compensation Liabilities & Contingency.

  3. Revenue FY2010 – FY2011 Revenue $ Billions -2.0% +6.3% +2.9% -5.8%

  4. Financial Results * Before RHB Pre-Funding, Non-Cash Adjustments to Workers’ Compensation Liabilities & Contingency.

  5. Operating Expenses * Before RHB Pre-Funding, Non-Cash Adjustments to Workers’ Compensation Liabilities & Contingency.

  6. Workhour Changes September YTD – FY 2011 177 M 168 B 1,149 M 215 M 150 M 399 M 59 M 148 M DELIVERY FREQUENCY September 2011 YTD Reduction vs. 2010 = 34.1M hrs

  7. Total Factor Productivity

  8. Financial Results * Before RHB Pre-Funding, Non-Cash Adjustments to Workers’ Compensation Liabilities & Contingency.

  9. IntegratingRequired Annual Public Reports • USPS publishes multiple public reports • Documents respond to different legislative requirements • Comprehensive Statement on Postal Operations (PRA, PAEA) • Annual Report (PAEA) • Annual Performance Report and Plan (GPRA) • New Legislation (Government Performance and Results Modernization Act) and OMB guidance recommends report simplification and consolidation

  10. Integrated Annual Public Report • Key Content (Single Document) – to be published end of November • Year in Review – Financial Highlights • Core Strategies • Board of Governors and Executive Leadership Team • 2011 Financial Summary • Operating Statistics • Comprehensive Statement on Postal Operations - Summary of 2011 initiatives • 2011 Annual Performance Report and 2012 Performance Plan

  11. FY 2011 Financial Results • Requesting approval of the following: • 10-K and Financial Statements • FY 2011 Comprehensive Statement, including the Annual Performance Report and Annual Performance Plan

  12. 2012 Integrated Financial Plan Board of Governors’ Open Session November 15, 2011 Joe Corbett Chief Financial Officer & Executive Vice President

  13. FY 2012 Integrated Financial Plan • Requesting approval of the following: • FY 2012 Integrated Financial Plan • FY 2013 Congressional Reimbursement (Appropriations Request)

  14. Economic Indicators Primary Volume Drivers for Each Class of Mail Standard & Priority 53% Less Growth 24% Less Growth Standard First-Class 28% Less Growth Relatively Flat Source: Global Insight – August 2011

  15. Volume 167.9 158.0 Statements of Operations FY 2011 FY 2012 In Billions IFP Revenue $ 65.7 $ 64.0 Expenses 67.9 67.0 Operating Income (Loss) $ (2.2) $ (3.0) 0 RHB Pre-funding (Current Law) (11.1) Restructuring Charge* — (TBD) (TBD) Non-cash Workers' Comp Adj. (2.9) Net Income (Loss) $ (5.1) $ (14.1) * Equipment and Facilities Impairments, Workers’ Comp, Unemployment, and VERA’s

  16. Revenue FY2006 – FY2012 Revenue $ Billions $75.0 $75.0 $72.8 $68.1 $67.1 $65.7 $64.0 SM FCM

  17. Volume 167.9 158.0 Statements of Operations FY 2011 FY 2012 In Billions IFP Revenue $ 65.7 $ 64.0 Expenses 67.9 67.0 Operating Income (Loss) $ (2.2) $ (3.0) 0 RHB Pre-funding (Current Law) (11.1) Restructuring Charge* — (TBD) (TBD) Non-cash Workers' Comp Adj. (2.9) Net Income (Loss) $ (5.1) $ (14.1) * Equipment and Facilities Impairments, Workers’ Comp, Unemployment, and VERA’s

  18. Cumulative Savings vs. Workhours ($ Billions) Cumulative savings primarily from headcount reductions FY12 Savings $2.5 Billion FY12 Plan Reduction of 58M hours Total Workhours

  19. Volume 167.9 158.0 Statements of Operations FY 2011 FY 2012 In Billions IFP Revenue $ 65.7 $ 64.0 Expenses 67.9 67.0 Operating Income (Loss) $ (2.2) $ (3.0) 0 RHB Pre-funding (Current Law) (11.1) Restructuring Charge* — (TBD) Non-cash Workers' Comp Adj. (2.9) (TBD) Net Income (Loss) $ (5.1) $ (14.1) * Equipment and Facilities Impairments, Workers’ Comp, Unemployment, and VERA’s

  20. Capital Commitments of $900MFor 2012

  21. Available Liquidity at Month-End FERS Impacts FY11 Actuals FY12 Forecast Min.1 month liquidity $7B FERS Withholding Pay FERS $0.6B $0.1B Assumes: No RHB pre-funding in 2011 or 2012 Pay FERS amounts withheld and resume contributions in December

  22. Request for FY 2013 Congressional Reimbursement No request for Public Service Subsidy (cost of Universal Service Obligation) – range of $460M to $3.7B

  23. FY 2012 Integrated Financial Plan • Requesting approval of the following: • FY 2012 Integrated Financial Plan • FY 2013 Congressional Reimbursement (Appropriations Request)

  24. Quarter 4, Fiscal Year 2011 Service Performance and Customer Experience Megan J. Brennan Chief Operating Officer

  25. Quarter 4, Fiscal Year 2011 Rapidly Changing Environment • Major Infrastructure Changes • Challenges from the Elements • Employees Delivered

  26. Target – 96.65 Single-Piece First-Class Overnight 98 96 96.7 96.4 96.2 96.3 94 92 90 88 QTR 4 YTD FY11 SPLY Source: TTMS

  27. Target – 94.15 Single-Piece First-Class 2 - Day 98 96 94.8 94 94.0 93.6 93.4 92 90 88 QTR 4 YTD FY11 SPLY Source: TTMS

  28. Target – 92.85 Single-Piece First-Class 3 to 5 Day 98 96 94 93.7 92.6 92 91.6 90 91.2 88 QTR 4 YTD FY11 SPLY Source: TTMS

  29. Target – 94.00 SPLY Single-Piece First-Class International 95 92.7 90 90.6 90.2 89.4 85 80 QTR 4 YTD FY11 Source: TTMS

  30. Target – 94.15 Target – 92.85 Target – 96.65 Presort First-Class Presort First-Class 98 93 93.8 92.1 91.1 90.8 89.1 90.6 88 83 Overnight 2-Day 3-Day Qtr 4 YTD There is no SPLY for Presort Source: TTMS

  31. Process Improvement Continuous Improvement Initiatives • 24 Hour Clock Execution • Reduce Variation • Quality Focus • Leverage Service Diagnostic Tools • Network Management

  32. Quarter 4, Fiscal Year 2011 Customer Experience Measurement

  33. 100 90 80 88.1 70 60 50 40 QTR 4 SPLY Customer Experience Measurement Overall Experience 86.8 83.6 82.0 Residential Small Business 34

  34. 100 90 91.2 91.2 80 70 60 50 40 QTR 4 SPLY Customer Experience Measurement Residential Experience 90.0 89.4 83.9 82.3 62.7 60.0 Receiving Sending PO Visit Contact 35

  35. QTR 4 SPLY Customer Experience Measurement Small Business Experience 100 90 88.2 87.0 85.4 86.7 80 79.0 76.9 70 60 53.4 50 51.7 40 Receiving Sending PO Visit Contact 36

  36. CEM - Process Improvement Continuous Improvement Initiatives • Ownership and Resolution of Issue • Customer Experience Essentials Training • Increased Use of Diagnostics

  37. Summary Plan to Move at an Accelerated Pace q Infrastructure Changes to Continue q Our Commitment q Predictable Service q Industry Engagement q

  38. Quarter 4, Fiscal Year 2011 Service Performance and Customer Experience Megan J. Brennan Chief Operating Officer

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