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NPPC MeetingDecember 5, 2013

USPS State of the BusinessUpdate

2December 5, 2013December 5, 2013USPS Update– NPPC Meeting

September YTD - 12 months FY FY(Billions) 2013 2012Revenue (excl. accounting est. change) $66.0 $65.2

Expenses* 66.7 67.5 Separation Incentive Costs 0.3 0.1

Operating Income (Loss)** (1.0) (2.4)

Changes in Accounting Estimate*** 1.3 -

Retiree Health Benefits Pre-Funding (5.6) (11.1)

Workers' Comp. Fair Value Adj. 1.7 (0.4)

Workers' Comp. Other Non-Cash Adj. (1.4) (2.0)

Net Income (Loss) ($5.0) ($15.9)

Liquidity Days (of oper. cash) 9 8Volume (Pieces) 158 160

* Before RHB pre-funding and non-cash adjustments to workers’ compensation liabilities ** Before accounting estimate change, RHB pre-funding, and non-cash adjustments to workers’ compensation liabilities. *** Newly available data on forever stamp usage resulted in a $1.3B reduction in Deferred Revenue – Prepaid Postage. Note: Delivery days were equal to FY2012. Retail had one additional weekday in FY2013 vs. FY2012.

Financial ResultsFiscal Year-End

3December 5, 2013December 5, 2013USPS Update– NPPC Meeting

$28.9 $28.1

$16.4 $16.9

$1.7 $1.7

$11.6 $12.5

$2.8 $3.0 $3.8 $3.8

-$5.0

$5.0

$15.0

$25.0

$35.0

$45.0

$55.0

$65.0

FY12 FY13*

First-Class Standard Periodicals Ship Svcs & Pkgs International Other

Total RevenueFY12 vs. FY13 Year-End

$ Billions

-2.4%

+3.0%

+8.0%

+1.2%

+7.0%

-1.4%

-4.2%

Volume: - 4.1%

Volume: + 6.0%

Volume: + 1.8%

* Excludes $1.3B impact of change in accounting estimate for Deferred Revenue-Prepaid Postage.

.

$65.2 $66.0*

4December 5, 2013December 5, 2013USPS Update– NPPC Meeting

Unrestricted Cash

Buildings & Equipment, net of depreciation

Other assets

Total Assets

$ 2.3B

$ 17.5B

$ 1.8B

$21.6B

Retiree Health Benefits

Workers’ Compensation

Debt

Accrued Compensation, benefits and leave

Deferred Revenue*

Other

Total Liabilities**

$16.8B

$17.2B

$15.0B

$ 3.5B

$ 3.6B

$ 5.4B

$61.5B

ASSETS LIABILITIES

• Liabilities exceed assets by approx. $40 billion

• The USPS has only 35 cents of assets to cover each dollar of its liabilities

* Newly available data on forever stamp usage resulted in a $1.3B reduction in Deferred Revenue – Prepaid Postage** Under multi-employer accounting rules, there are approximately $51B in obligations not shown on the balance sheet.

Significant profits over years and legislation are needed to recover.

A Deep Financial HoleSeptember 2013

5USPS Update– NPPC Meeting December 5, 2013December 5, 2013

USPS Business Plan

Strategic Initiatives ($ Billions)

2016 Savings

Operational Initiatives Networks 3.1$

Retail 1.5

Delivery 1.4

Total Operational Initiatives 6.0

Workforce & Non-Personnel 2.6

Legislative Initiatives 5-Day Mail Del. + Saturday Pkgs 1.9

Postal Health Plan 8.6

FERS & Other 0.6

Total Legislative Initiatives 11.1

Total 2016 Savings 19.7$

Savings By Initiative

6December 5, 2013December 5, 2013USPS Update– NPPC Meeting

Network● 143Plant Consolidations Completed in 2013● 657Mail Moves Completed in 2013

Retail● 3.9 million Surveys Mailed Out● 8,454 Community Meetings Held● 7,985 Implementations to Date

Delivery● DUO – Consolidated 2,510 Delivery Units in 2013● Eliminated 24,000 Delivery Routes since 2006, 1,437 in

2013 alone● 60% of New Delivery Centralized *

Our Actions Help Close the Gap

Service has remained at high levels* Includes voluntary mode conversions * Includes voluntary mode conversions

7December 5, 2013December 5, 2013USPS Update– NPPC Meeting

Require USPS Health Care Plan Resolves RHB Prefunding Issue

Refund FERS Overpayment

Adjust Delivery Frequency (6-Day Packages, 5-Day Mail)

Streamline Governance Model

Authority to Expand Products and Services

Require Defined Contribution System for Future Postal Employees

Instructions to Arbitrator

Reform Workers’ Compensation

Right to Appeal EEOC Class Action Decisions

Key Legislative GoalsTo Regain Financial Self-Sufficiency

8December 5, 2013December 5, 2013USPS Update– NPPC Meeting

USPS Retiree Health BenefitsCosts and Liabilities

$80

Retiree Health BenefitsPer Capita Costs

USPS Retiree Health Benefits Liability 2014PSRHBF - $Billions

$100

$60

46.9

49.1

$40

$20

$0

2.9

Current

49.1

Funded Liability

Unfunded Liability

$0

$2,000

$4,000

$6,000

$8,000

$6,233

Average Post 65 Healthcare Cost -FEHB

$3,400

Post 65 Wrap Around Cost -Private Sector

A&B + DPostal Retirees in FEHB

9December 5, 2013December 5, 2013USPS Update– NPPC Meeting

Revenue Growth InitiativesWill Accompany Cost and Efficiency Improvements

Enhance Mail: Create a multi-sensory experience for consumers Relevant Actionable Functional Creative Hardcopy to digital that connects consumers to:

Web site, Social media, or Purchase point

Grow Packages: Close competitive gaps to level the playing field:

Competitive pricing New Priority Mail features

“Day-Certain” and insurance Build advantages by targeting new solution for e-commerce:

Speedier service Improved access that

enables customers and consumers to use services more easily and effectively

Digital Products: Extend the current USPS technology and data platform in ways that help better support the mailing industry and the American public.