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CONFIDENTIAL – For Internal Review and Discussion Only
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Page 1: CONFIDENTIAL – For Internal Review and Discussion Only.

CONFIDENTIAL – For Internal Review and Discussion Only

Page 2: CONFIDENTIAL – For Internal Review and Discussion Only.

Financial Matters: 2011 Financial Results

Board of Governors’Open SessionNovember 15, 2011

Joe CorbettChief Financial Officer & Executive Vice President

Page 3: CONFIDENTIAL – For Internal Review and Discussion Only.

3

Financial Results

September YTD (Billions)

FY 2011

FY 2010

Revenue $65.7 $67.1Expenses 67.9 67.7

Operating Income (Loss)* (2.2) (0.6) Retiree Hlth. Benefits Pre-Funding - (5.5) Workers Comp: Fair Value Adj. (1.0) (2.0) Workers Comp Claims, Adj. & Contingency (1.9) (0.4)

Net Income (Loss) ($5.1) ($8.5)

Volume (Pieces) 167.9 170.9

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

Page 4: CONFIDENTIAL – For Internal Review and Discussion Only.

4

$32.2

$17.8

$9.0

$6.7

First-Class Mail$34.2

Standard Mail$17.3

Shipping Services$8.5

Other $7.1

$65.7$67.1

$0

$10

$20

$30

$40

$50

$60

$70

2010 2011

First-Class Mail Standard Mail Shipping Services Other

Revenue $ Billions

Revenue FY2010 – FY2011

-5.8%

+2.9%

+6.3%

-2.0%

Page 5: CONFIDENTIAL – For Internal Review and Discussion Only.

5

Financial Results

September YTD (Billions)

FY 2011

FY 2010

Revenue $65.7 $67.1Expenses 67.9 67.7

Operating Income (Loss)* (2.2) (0.6) Retiree Hlth. Benefits Pre-Funding - (5.5) Workers Comp: Fair Value Adj. (1.0) (2.0) Workers Comp Claims, Adj. & Contingency (1.9) (0.4)

Net Income (Loss) ($5.1) ($8.5)

Volume (Pieces) 167.9 170.9

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

Page 6: CONFIDENTIAL – For Internal Review and Discussion Only.

6

September YTD(Billions)

FY 2011

FY 2010

Compensation $36.8 $37.5Benefits 15.2 14.7Transportation 6.4 5.9Depreciation 2.3 2.5Supplies & Services 2.3 2.2Rent, Utilities & Other 4.9 4.9Operating Expenses * $67.9 $67.7

Operating Expenses

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

Page 7: CONFIDENTIAL – For Internal Review and Discussion Only.

7

-1.7%

-4.2%

-6.5%

-2.3%-2.9%

-3.2%

-0.2%

0.2%

-8%

-6%

-4%

-2%

0%

2%

Mail Volume

Mail

Processing

Customer

Services City Delivery Rural Delivery Postmasters Other Total Hours

(% S

PL

Y)

Workhour Changes September YTD – FY 2011

215 M

215 M

150 M150 M 399 M399 M

177 M

148 M148 M 1,149 M1,149 M59 M168 B

168 B

DELIVERY FREQUENCY

September 2011 YTD Reduction vs. 2010 = 34.1M hrs

Page 8: CONFIDENTIAL – For Internal Review and Discussion Only.

8

Total Factor Productivity

Average Annual Growth 1.1% [2000 - 2011] 21.6

0

5

10

15

20

25

1972 1980 1990 2000 2011

Average Annual Growth 0.3% [1972 - 1999]

Page 9: CONFIDENTIAL – For Internal Review and Discussion Only.

9

Financial Results

September YTD (Billions)

FY 2011

FY 2010

Revenue $65.7 $67.1Expenses 67.9 67.7

Operating Income (Loss)* (2.2) (0.6) Retiree Hlth. Benefits Pre-Funding - (5.5) Workers Comp: Fair Value Adj. (1.0) (2.0) Workers Comp Claims, Adj. & Contingency (1.9) (0.4)

Net Income (Loss) ($5.1) ($8.5)

Volume (Pieces) 167.9 170.9

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

Page 10: CONFIDENTIAL – For Internal Review and Discussion Only.

10

Integrating Required 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

Page 11: CONFIDENTIAL – For Internal Review and Discussion Only.

11

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

Page 12: CONFIDENTIAL – For Internal Review and Discussion Only.

12

Requesting approval of the following:

1. 10-K and Financial Statements

2. FY 2011 Comprehensive Statement, including the Annual Performance Report and Annual Performance Plan

FY 2011 Financial Results

Page 13: CONFIDENTIAL – For Internal Review and Discussion Only.

®

2012 Integrated Financial Plan

Board of Governors’ Open Session

Joe CorbettChief Financial Officer & Executive Vice President

November 15, 2011

Page 14: CONFIDENTIAL – For Internal Review and Discussion Only.

14

Requesting approval of the following:

1. FY 2012 Integrated Financial Plan

2. FY 2013 Congressional Reimbursement (Appropriations Request)

FY 2012 Integrated Financial Plan

Page 15: CONFIDENTIAL – For Internal Review and Discussion Only.

15

Economic Indicators Primary Volume Drivers for Each Class of

Mail

Standard & Priority

First-Class

Retail Sales

2.5%

1.0%

-1.5%

-9.6%

2.8%

5.7%

2.7%

-10%

-7%

-4%

-1%

2%

5%

'06 '07 '08 '09 10 11 12

Investment

4.8%

-6.3%

-25.8%

10.1%

4.4%

-3.5%

6.1%

-26%

-20%

-14%

-8%

-2%

4%

10%

16%

'06 '07 '08 '09 10 11 12

Employment Growth

1.3%

-4.7%

-2.3%

1.5%

-0.1%

2.1%1.4%

-5%

-3%

-1%

1%

3%

'06 '07 '08 '09 10 11 12

Relatively Flat

53% Less Growth

28% Less Growth

24% Less Growth

Source: Global Insight – August 2011

Standard

Page 16: CONFIDENTIAL – For Internal Review and Discussion Only.

16

Statements of Operations

In BillionsFY 2011 FY 2012

IFP

Revenue 65.7$ 64.0$

Expenses 67.9 67.0

Operating Income (Loss) (2.2)$ (3.0)$

RHB Pre-funding (Current Law) (11.1)

Non-cash Workers' Comp Adj. (2.9)

Net Income (Loss) (5.1)$

(14.1)$

Volume 167.9 158.0

0

Restructuring Charge* (TBD)

* Equipment and Facilities Impairments, Workers’ Comp, Unemployment, and VERA’s

(TBD)

Page 17: CONFIDENTIAL – For Internal Review and Discussion Only.

17

37.0 37.6 38.2 35.9 34.2 32.2 30.4

19.9 20.8 20.617.3

17.3 17.817.6

15.916.6 16.2

14.9 15.6 15.716.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

2006 2007 2008 2009 2010 2011 2012

First-Class Standard All Others

Revenue $ Billions

Revenue FY2006 – FY2012

FCM

SM

$72.8$75.0

$68.1 $67.1 $65.7 $64.0

$75.0

Page 18: CONFIDENTIAL – For Internal Review and Discussion Only.

18

Statements of Operations

In BillionsFY 2011 FY 2012

IFP

Revenue 65.7$ 64.0$

Expenses 67.9 67.0

Operating Income (Loss) (2.2)$ (3.0)$

RHB Pre-funding (Current Law) (11.1)

Non-cash Workers' Comp Adj. (2.9)

Net Income (Loss) (5.1)$

(14.1)$

Volume 167.9 158.0

0

Restructuring Charge* (TBD)

* Equipment and Facilities Impairments, Workers’ Comp, Unemployment, and VERA’s

(TBD)

Page 19: CONFIDENTIAL – For Internal Review and Discussion Only.

19

Cumulative Savings vs. Workhours

$16.2

$13.7

$12.3

$9.3

$3.2

$1.2

$0.0

1,423

1,373

1,459

1,091

1,258

1,183

1,149

1,000

1,100

1,200

1,300

1,400

1,500

2006 2007 2008 2009 2010 2011 2012

To

tal W

ork

ho

urs

(Mill

ion

s)

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18Cumulative savings primarily from headcount reductions

Total Workhours

($ Billions)FY12 Savings

$2.5 Billion

FY12 Plan Reduction of 58M hours

Page 20: CONFIDENTIAL – For Internal Review and Discussion Only.

20

Statements of Operations

In BillionsFY 2011 FY 2012

IFP

Revenue 65.7$ 64.0$

Expenses 67.9 67.0

Operating Income (Loss) (2.2)$ (3.0)$

RHB Pre-funding (Current Law) (11.1)

Non-cash Workers' Comp Adj. (2.9)

Net Income (Loss) (5.1)$

(14.1)$

Volume 167.9 158.0

0

Restructuring Charge* (TBD)

* Equipment and Facilities Impairments, Workers’ Comp, Unemployment, and VERA’s

(TBD)

Page 21: CONFIDENTIAL – For Internal Review and Discussion Only.

21

Capital Commitments of $900MFor 2012

5 yr Avg. FY2010 FY2011 FY2012($ Billions) thru 9/30/09 Actual Actual IFP

Facilities $0.8 $0.5 $0.5 $0.4

Equipment 0.8 0.3 0.2 0.1

Infrastructure & Support 0.5 0.1 0.1 0.4

Total $2.1 $0.9 $0.8 $0.9

Page 22: CONFIDENTIAL – For Internal Review and Discussion Only.

22

(2.0)

0.0

2.0

4.0

6.0

8.0

Oct

-10

No

v-10

Dec

-10

Jan

-11

Feb

-11

Mar

-11

Ap

r-11

May

-11

Jun

-11

Jul-

11

Au

g-1

1

Sep

-11

Oct

-11

No

v-11

Dec

-11

Jan

-12

Feb

-12

Mar

-12

Ap

r-12

May

-12

Jun

-12

Jul-

12

Au

g-1

2

Sep

-12

Oct

-12

($ B

illio

ns)

Min.1 month liquidity $7B

Available Liquidity at Month-EndFERS Impacts

$0.6B

FY11 Actuals FY12 Forecast

Assumes: No RHB pre-funding in 2011 or 2012

Pay FERS amounts withheld and resume contributions in December

Pay FERS

FERS Withholding

$0.1B

Page 23: CONFIDENTIAL – For Internal Review and Discussion Only.

23

Request for FY 2013 Congressional Reimbursement

No request for Public Service Subsidy (cost of Universal Service Obligation) – range of $460M to $3.7B

($Millions) FY 2011 FY 2012 FY 2012 FY 2013Current

Congr. USPS Congr. USPSReimbursements to cover: Approved Request Bills Request

Free Mail for the Blind (cost per piece increasing) $68.3 $80.2 $68.2 $87.1

Overseas Voting (at traditional First Class rate) 0.6 0.9 1.3 1.0

Reconciliation Adjustments (from prior years) 6.0 6.5 8.7 18.5

Revenue Foregone Act - 1993 ($1.2B over 42 Years) 11.8 29.0 0.0 46.2

Total Appropriation Request $86.7 $130.0 $78.2 $153.5

0.0

78.2

13.4

Total Reimbursements: Free Mail for Blind & Overseas Voting

74.9 101.0

New Cost - Overseas Military Voting via Express Mail (New Law)

0.0 0.7

107.3

Page 24: CONFIDENTIAL – For Internal Review and Discussion Only.

24

Requesting approval of the following:

1. FY 2012 Integrated Financial Plan

2. FY 2013 Congressional Reimbursement (Appropriations Request)

FY 2012 Integrated Financial Plan

Page 25: CONFIDENTIAL – For Internal Review and Discussion Only.

Quarter 4, Fiscal Year 2011Service Performance

andCustomer Experience

Megan J. BrennanChief Operating Officer

Page 26: CONFIDENTIAL – For Internal Review and Discussion Only.

26

Rapidly Changing Environment

Major Infrastructure Changes

Challenges from the Elements

Employees Delivered

Quarter 4, Fiscal Year 2011Quarter 4, Fiscal Year 2011

Page 27: CONFIDENTIAL – For Internal Review and Discussion Only.

27

Single-Piece First-ClassSingle-Piece First-Class

Overnight

Source: TTMS

96.4 96.296.7 96.3

88

90

92

94

96

98

QTR 4 YTD

FY11 SPLY

Target – 96.65Target – 96.65

Page 28: CONFIDENTIAL – For Internal Review and Discussion Only.

28

Single-Piece First-ClassSingle-Piece First-Class

2 - Day

Source: TTMS

94.093.4

94.8

93.6

88

90

92

94

96

98

QTR 4 YTD

FY11 SPLY

Target – 94.15Target – 94.15

Page 29: CONFIDENTIAL – For Internal Review and Discussion Only.

29

Single-Piece First-ClassSingle-Piece First-Class

3 to 5 Day

Source: TTMS

91.2 91.6

92.693.7

88

90

92

94

96

98

QTR 4 YTD

FY11 SPLY

Target – 92.85Target – 92.85

Page 30: CONFIDENTIAL – For Internal Review and Discussion Only.

30

Single-Piece First-ClassSingle-Piece First-Class

International

Source: TTMS

90.692.7

89.4

80

85

90

95

QTR 4 YTD

FY11 SPLY

Target – 94.00Target – 94.00

90.2

Page 31: CONFIDENTIAL – For Internal Review and Discussion Only.

31

Presort First-ClassPresort First-Class

Presort First-Class

Source: TTMS There is no SPLY for Presort

91.1 92.1

93.8

90.889.1 90.6

83

88

93

98

Overnight 2-Day 3-Day

Qtr 4 YTD

Target – 96.65Target – 96.65 Target – 94.15Target – 94.15 Target – 92.85Target – 92.85

Page 32: CONFIDENTIAL – For Internal Review and Discussion Only.

Process ImprovementProcess Improvement

24 Hour Clock Execution

Reduce Variation

Quality Focus

Leverage Service Diagnostic Tools

Network Management

Continuous Improvement Initiatives

Page 33: CONFIDENTIAL – For Internal Review and Discussion Only.

Quarter 4, Fiscal Year 2011Customer Experience Measurement

Page 34: CONFIDENTIAL – For Internal Review and Discussion Only.

34

40

50

60

70

80

90

100

34

Overall Experience

Residential Small Business

88.186.8

QTR 4 SPLY

Customer Experience MeasurementCustomer Experience Measurement

83.6 82.0

Page 35: CONFIDENTIAL – For Internal Review and Discussion Only.

3535

Residential Experience

Receiving Sending PO Visit Contact

Customer Experience MeasurementCustomer Experience Measurement

40

50

60

70

80

90

100

91.290.0 89.4

83.9 82.3

62.760.0

QTR 4 SPLY

91.2

Page 36: CONFIDENTIAL – For Internal Review and Discussion Only.

3636

Small Business Experience

Receiving Sending PO Visit Contact

Customer Experience MeasurementCustomer Experience Measurement

40

50

60

70

80

90

100

88.286.7 87.0 85.4

79.076.9

53.4 51.7

QTR 4 SPLY

Page 37: CONFIDENTIAL – For Internal Review and Discussion Only.

CEM - Process ImprovementCEM - Process Improvement

Ownership and Resolution of Issue

Continuous Improvement Initiatives

Customer Experience Essentials Training

Increased Use of Diagnostics

Page 38: CONFIDENTIAL – For Internal Review and Discussion Only.

38

Plan to Move at an Accelerated Pace

Our Commitment

Predictable Service

Industry Engagement

Infrastructure Changes to Continue

Summary

Page 39: CONFIDENTIAL – For Internal Review and Discussion Only.

Quarter 4, Fiscal Year 2011Service Performance

andCustomer Experience

Megan J. BrennanChief Operating Officer

Page 40: CONFIDENTIAL – For Internal Review and Discussion Only.