CONFIDENTIAL For Internal Review and Discussion Only

Financial Matters: 2011 Financial Results

Board of Governors Open Session
November 15, 2011
Joe Corbett Chief Financial Officer & Executive Vice President

Financial Results
September YTD
(Billions)

FY 2011

FY 2010

Revenue Expenses Operating Income (Loss)*

Retiree Hlth. Benefits Pre-Funding Workers Comp: Fair Value Adj. Workers Comp Claims, Adj. & Contingency

$65.7 $67.1 67.9 67.7 (2.2) (0.6) (5.5) (1.0) (2.0) (1.9) (0.4) ($5.1) ($8.5) 167.9 170.9

Net Income (Loss) Volume (Pieces)

* Before RHB Pre-Funding, Non-Cash Adjustments to Workers Compensation Liabilities & Contingency. 3

Revenue FY2010 FY2011

Revenue $ Billions
$70 $60 $50 $40 $30 $20 $10 $0 2010 First-Class Mail Standard Mail 2011 Shipping Services Other First-Class Mail $34.2
-5.8%

$67.1 Other $7.1 Shipping Services $8.5 Standard Mail $17.3

-2.0%

$65.7 $6.7

+6.3%

$9.0

+2.9%

$17.8

$32.2

Financial Results
September YTD
(Billions)

FY 2011

FY 2010

Revenue Expenses Operating Income (Loss)*

Retiree Hlth. Benefits Pre-Funding Workers Comp: Fair Value Adj. Workers Comp Claims, Adj. & Contingency

$65.7 $67.1 67.9 67.7 (2.2) (0.6) (5.5) (1.0) (2.0) (1.9) (0.4) ($5.1) ($8.5) 167.9 170.9

Net Income (Loss) Volume (Pieces)

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

Operating Expenses

September YTD
(Billions)

FY 2011 $36.8 15.2 6.4 2.3 2.3 4.9 $67.9

FY 2010 $37.5 14.7 5.9 2.5 2.2 4.9 $67.7

6

Compensation Benefits Transportation Depreciation Supplies & Services Rent, Utilities & Other Operating Expenses *

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

Workhour Changes September YTD FY 2011

Mail Mail Volume Processing Customer Services City Delivery Rural Delivery Postmasters Other Total Hours

2%
0.2% 177 M

0%
168 B 215 M 150 M 399 M 59 M -0.2% 148 M
1,149 M

(% SPLY)

-2%

-1.7% -2.3% -3.2% -4.2% -2.9%

-4%

-6%
-6.5%

DELIVERY FREQUENCY

-8%
September 2011 YTD Reduction vs. 2010 = 34.1M hrs

Total Factor Productivity

25
Average Annual Growth 1.1% [2000 - 2011] 21.6

20 15 10 5
Average Annual Growth 0.3% [1972 - 1999]

0
1972 1980 1990 2000 2011

Financial Results
September YTD
(Billions)

FY 2011

FY 2010

Revenue Expenses Operating Income (Loss)*

Retiree Hlth. Benefits Pre-Funding Workers Comp: Fair Value Adj. Workers Comp Claims, Adj. & Contingency

$65.7 $67.1 67.9 67.7 (2.2) (0.6) (5.5) (1.0) (2.0) (1.9) (0.4) ($5.1) ($8.5) 167.9 170.9

Net Income (Loss) Volume (Pieces)

* Before RHB Pre-Funding, Non-Cash Adjustments to Workers Compensation Liabilities & Contingency. 9

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

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: 1. 10-K and Financial Statements 2. 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

FY 2012 Integrated Financial Plan

Requesting approval of the following:

1. FY 2012 Integrated Financial Plan
2. FY 2013 Congressional Reimbursement (Appropriations Request)

14

Economic Indicators Primary Volume Drivers for Each Class of Mail

Retail Sales

Standard & Priority

5% 2% -1% -4%
2.5% 1 .0% 2.8% 5.7% 2.7%

'06

'07

'08 -1.5%

'09

10

11

12

53% Less Growth

24% Less Growth

-7% -10%
-9.6%

Investment

Employment Growth
3%
2.1 %

Standard
16% 10% 4% -2% -8% -14% -20% -26%
-25.8% 4.8% -3.5% 1 % 0.1 6.1 % 4.4%

First-Class
1 .4% 1 .3% 1 .5%

1% -1% -3% -5% '06

'06

'07

'08-6.3% '09

10

11

12

'07

'08

-0.1 %

'09

10
-2.3%

11

12

28% Less Growth

Relatively Flat
-4.7%

Source: Global Insight August 2011

15

Statements of Operations

In Billions
Revenue Expenses Operating Income (Loss) RHB Pre-funding (Current Law) Restructuring Charge* Non-cash Workers' Comp Adj. Net Income (Loss) Volume $ $ $

FY 2011

FY 2012 IFP $ 64.0 67.0 $ (3.0) (11.1) (TBD) (TBD) $ (14.1) 158.0

65.7 67.9 (2.2)

0
(2.9) (5.1) 167.9

* Equipment and Facilities Impairments, Workers Comp, Unemployment, and VERAs

16

Revenue FY2006 FY2012

Revenue $ Billions

80.0
$72.8

$75.0

$75.0 $68.1 $67.1 $65.7

70.0
15.9

16.6

16.2 14.9 15.6 15.7

$64.0

60.0 50.0 40.0 30.0 20.0 10.0

FCM

16.0

19.9
SM

20.8

20.6 17.3 17.3 17.8 17.6

37.0

37.6

38.2

35.9

34.2

32.2

30.4

0.0 2006 2007 First-Class 2008 2009 Standard 2010 2011 All Others 2012

17

Statements of Operations

In Billions
Revenue Expenses Operating Income (Loss) RHB Pre-funding (Current Law) Restructuring Charge* Non-cash Workers' Comp Adj. Net Income (Loss) Volume $ $ $

FY 2011

FY 2012 IFP $ 64.0 67.0 $ (3.0) (11.1) (TBD) (TBD) $ (14.1) 158.0

65.7 67.9 (2.2)

0
(2.9) (5.1) 167.9

* Equipment and Facilities Impairments, Workers Comp, Unemployment, and VERAs

18

Cumulative Savings vs. Workhours

1,500
1,459

Cumulative savings primarily from headcount reductions

1,423

FY12 Savings $2.5 Billion

($ Billions)

$18 $16.2 $16

1,400

1,373 $12.3

$13.7

$14 $12

Total Workhours (Millions)

1,300

$9.3 1,258

$10 $8
1,149 1,091

1,200

1,183

$6 $4

1,100
$1.2 $0.0

$3.2

FY12 Plan Reduction of 58M hours

$2 $0

1,000
2006 2007 2008 2009 2010 2011

2012

Total Workhours

19

Statements of Operations

In Billions
Revenue Expenses Operating Income (Loss) RHB Pre-funding (Current Law) Restructuring Charge* Non-cash Workers' Comp Adj. Net Income (Loss) Volume $ $ $

FY 2011

FY 2012 IFP $ 64.0 67.0 $ (3.0) (11.1) (TBD) (TBD) $ (14.1) 158.0

65.7 67.9 (2.2)

0
(2.9) (5.1) 167.9

* Equipment and Facilities Impairments, Workers Comp, Unemployment, and VERAs

20

Capital Commitments of $900M For 2012

($ Billions)

5 yr Avg. thru 9/30/09

FY2010 Actual

FY2011 Actual

FY2012 IFP

Facilities Equipment Infrastructure & Support Total

$0.8 0.8 0.5 $2.1

$0.5 0.3 0.1 $0.9

$0.5 0.2 0.1 $0.8

$0.4 0.1 0.4 $0.9

21

Available Liquidity at Month-End FERS Impacts

FY11 Actuals
Min.1 month liquidity $7B FERS Withholding

FY12 Forecast

8.0

6.0

($ Billions)

4.0

Pay FERS

2.0

$0.6B
0.0

$0.1B

(2.0)
Nov-10 Nov-11 Apr-11 Aug-11 Apr-12 Aug-12 Oct-10 Oct-11 Jun-11 Jun-12 Dec-10 Feb-11 Dec-11 Sep-11 Feb-12 Jan-11 Jan-12 May-11 May-12 Sep-12 Mar-11 Mar-12 Oct-12 Jul-11 Jul-12

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

($Millions)

FY 2011 Congr. Approved $68.3 0.6 0.0 6.0 74.9 11.8 $86.7

FY 2012 USPS Request $80.2 0.9 13.4 6.5 101.0 29.0 $130.0

Reimbursements to cover: Free Mail for the Blind (cost per piece increasing) Overseas Voting (at traditional First Class rate) New Cost - Overseas Military Voting via Express Mail (New Law) Reconciliation Adjustments (from prior years) Total Reimbursements: Free Mail for Blind & Overseas Voting
Revenue Foregone Act - 1993 ($1.2B over 42 Years)

FY 2012 Current Congr. Bills $68.2 1.3 0.0 8.7 78.2 0.0 $78.2

FY 2013 USPS Request $87.1 1.0 0.7 18.5 107.3 46.2 $153.5

Total Appropriation Request

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:

1. FY 2012 Integrated Financial Plan
2. FY 2013 Congressional Reimbursement (Appropriations Request)

24

Quarter 4, Fiscal Year 2011 Service Performance and Customer Experience

Megan J. Brennan Chief Operating Officer

Quarter 4, Fiscal Year 2011

Rapidly Changing Environment

Major Infrastructure Changes Challenges from the Elements

Employees Delivered

26

Single-Piece First-Class

Overnight
Target 96.65
98 96 94 92 90 88

96.4

96.7

96.2

96.3

QTR 4

YTD

FY11
Source: TTMS

SPLY
27

Single-Piece First-Class

2 - Day
Target 94.15
98 96

94

94.8

94.0
92 90 88

93.4

93.6

QTR 4

YTD

FY11
Source: TTMS

SPLY
28

Single-Piece First-Class

3 to 5 Day
Target 92.85
98 96

94
92 90 88

92.6

93.7
91.6

91.2
QTR 4 YTD

FY11
Source: TTMS

SPLY
29

Single-Piece First-Class

International
Target 94.00
95

92.7
90

90.6

90.2

89.4

85

80

QTR 4

YTD

FY11
Source: TTMS

SPLY
30

Presort First-Class

Presort First-Class
Target 96.65 Target 94.15 Target 92.85

98

93

93.8 91.1 90.8 92.1 89.1 90.6

88

83

Overnight

2-Day

3-Day

Qtr 4
Source: TTMS

YTD
31 There is no SPLY for Presort

Process Improvement

Continuous Improvement Initiatives

24 Hour Clock Execution

Reduce Variation Quality Focus Leverage Service Diagnostic Tools Network Management

Quarter 4, Fiscal Year 2011 Customer Experience Measurement

Customer Experience Measurement

Overall Experience
100

90
88.1 80 70 60 86.8 83.6 82.0

50
40 Residential QTR 4 Small Business SPLY
34 34

Customer Experience Measurement

Residential Experience
100

90
80 70 60

91.2

90.0

91.2

89.4 83.9 82.3

62.7

60.0

50
40 Receiving Sending QTR 4 PO Visit SPLY
35 35

Contact

Customer Experience Measurement

Small Business Experience

100

90
88.2

80 70 60

86.7

87.0

85.4 79.0 76.9

50
40 Receiving Sending QTR 4 PO Visit SPLY

53.4

51.7

Contact
36 36

CEM - Process Improvement

Continuous Improvement Initiatives

Ownership and Resolution of Issue Customer Experience Essentials Training Increased Use of Diagnostics

Summary

Plan to Move at an Accelerated Pace

Infrastructure Changes to Continue

Our Commitment

Predictable Service
Industry Engagement

38

Quarter 4, Fiscal Year 2011 Service Performance and Customer Experience

Megan J. Brennan Chief Operating Officer