Dave Williams

Vice President Network Operations

Current State

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■ $15.9B loss in FY2012

■ $11.1B default in FY2012 to the

United States Treasury for Retiree

Health Benefits

■ $15B borrowing authority exhausted

■ Liquidity very low

Ongoing Financial Challenges

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The Prequel: Fifty-Two Billion Piece Drop

Mail Volume Decline: 25% from 2007 to 2012

Pie

ces in

bill

ions

Dire financial position requires urgent action to ensure continued

mail delivery and to restore long-term self sufficiency.

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The Prequel: Losses Weaken the USPS

$41B of Net Losses

$ b

illio

ns

Dire financial position requires urgent action to ensure continued

mail delivery and to restore long-term self sufficiency.

5

Continuous Efficiency Improvements Have

Helped Mitigate Effects of Business Threats

Career Employees – Reduced by 168,000 (24%) during last six fiscal years, without layoffs

(in thousands)

685663

623

584557

528496

696

'06 '07 '08 '09 '10 '11 '12 Feb. 28, '13

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Preliminary 5 Year Plan

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$45

$50

$55

$60

$65

$70

$75

$80

$85

$90

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

$ in Billions

Revenue

Baseline Expense

Outlook before any

Initiatives

Expenses Exceed Revenue

and The Gap is Growing

$20 B

Gap

Expense

RHB Pre-Funding

ends

Revenue

Net Losses

8

Flat Revenue from 2012 to 2017 $

Billio

ns

Total Revenue

9

Shipping/Packages Increase: $4.8B from

2012 to 2017 $

Billio

ns

10

First-Class Decline: $6.2B from 2012 to 2017 $

Billio

ns

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Profit Margin by Mail Class - 2012

It takes ~$3 in Package

revenue to make up the

profitability of every dollar

lost in First-Class Mail

revenue.

$28.9 Revenue

Margin

Attributable

Cost

$16.4

$11.6

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Initiatives – Increasing Efficiency

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Revenue Growth & Cost Reductions

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Summary of Operations Initiatives Annual Savings of $8.7 Billion

Retail & Acceptance

Processing Transportation

Delivery

$1.7B

$3.1B

$2.0B

6-Day/5-Day $1.9B

&

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Retail & Acceptance

Initiatives Objectives

•Match hours to transaction activity

•Consolidate low activity Post Offices and operate longer hours

•Village Post Offices

Retail Channel Strategy

•Move customers into low-cost channels

• Increase assisted self-service

•Provide easy, more convenient access to postal products on usps.com or 3rd party partners’ Web site

•Automate acceptance and verification procedures to:

• Improve customer experience

• Reduce work hours

Commercial Mail Acceptance Transformation

Post Plan

Retail & Acceptance Savings:

$1.7 Billion

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Processing Network Optimization

Initiative Objectives

•Consolidate excess network capacity

Transportation Initiative Objectives

•Eliminate multiple overnight trips

•Maximize trailer utilization

•Area transportation network

Processing & Transportation Savings:

$3.1 Billion

Reduce Transportation

Costs

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417 PROCESSING FACILITIES FY 2013

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$3.1B in

savings

by 2017

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Delivery

Delivery Unit Optimization

Initiatives Objectives

•Reduce number of routes

•Combine delivery units

GPS & Real Time Delivery Notification

•Rural contract and efficiency

Efficiency

Dynamic Delivery •The future of delivery

Delivery Savings:

$2.0 Billion

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Six-Day Packages/Five-Day Mail Savings:

$1.9 Billion

Delivery hours = 50% of total

postal hours. Largest cost

category.

Volumes dropped 25% since

2007

Five-day mail delivery 70%

supported

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New Delivery Schedule Components

Mail Delivery

• Monday – Friday

mail delivery

service

Package Delivery

• Monday –

Saturday

package delivery

service continues

Post Offices (P.O.)

• Post Offices

remain open on

Saturdays

• Mail delivered to

P.O. Boxes on

Saturdays

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Legislative Action

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Require USPS Health Care Plan

Resolves RHB Prepayment Issue

Refund FERS Overpayment

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 Goals

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Unnecessary Healthcare Costs Lead

to Poor Financial Health

Approximately $8 billion per

year savings thru 2016

Same or better coverage at

lower participant and USPS

cost

USPS and its employees have

paid $26 billion into Medicare

Competitive bidding

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FERS: $6 Billion Refund/$300 Million

Reduction Annually

Overfunded for decades

Demographics & pay

increases

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Summary of Legislative Initiatives Annual Savings of $8.3 Billion

$8B

$300M

Healthcare

FERS

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Projected Net Losses ($ in billions)Projected Net Losses ($ in billions)

Before the effects of Strategic Initiatives

Unsustainable Losses will Worsen without Urgent Actions

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Projections after Strategic Initiatives

Net Profit (1) ($ in billions)

(1) Excludes impacts of non-cash adjustments (if any) to workers’ compensation liability in 2013 - 2017.

Achieving the Business Plan requires full realization of all the Strategic Initiatives.

Without initiative impacts-

Average annual net losses (1) of $14B

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Projected Debt Reductions

Cash

D

eb

t Net Debt ($ in billions) virtually eliminated

(1) Excludes impacts of non-cash adjustments (if any) to workers’ compensation liability in 2013 - 2017.

Achieving the Business Plan requires full realization of all the Strategic Initiatives.

Without initiative impacts-

2017 Debt of $82B

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Innovating for Tomorrow

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Technology Innovations

Streamlined entry &

payment

Harness GPS & mobile

technology

Support world-class service

& efficient operations

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Linking Print & Digital

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March 2013

Real Mail Image

Notification

(RMIN)

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Real Mail Image Notification

• Real Mail Image Notification (RMIN) provides images of letters and flats directly to USPS PO box holders

• Customers can receive an email notification allowing them to view mail pieces destined for their PO box

• The image database also enables many other potential revenue and cost-savings opportunities

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Good Morning Dear valued U.S. Postal Service Customer,

Here are some images of mail that we will be delivering to your home address today!

Real Mail Image Notification

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Real Mail Image Notification

System Requirements

PO Box Notification

Letter and Flat Images sent to PO Box customers via email and

future web access

Current Pilot Test at 8 Northern Virginia Delivery Units

Automated collection of images during the final processing sort

Benefits

PO Box Holders know what is in their box before they drive to

pick it up

Provides an additional mail moment prior to customers receiving

the hard copy

Mailers could provide web links to their web site that get

imbedded in the images

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March 2013

Real-Time Scanning

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• Provides real-time communications and GPS

• Wireless tether for existing IMD to minimize cost

• Reduce posting of data from 5 hours to 20 minutes

Real-Time Scanning

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160 Billion pieces delivered annually

to 150 million addresses

A healthy, financially viable Postal Service is vital to the

U.S. economy.

The Mailing Industry is Critical for the

U.S. Economy.

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