1. USPS Chief Financial Officer & Executive Vice President
Joseph Corbett
USPS Chief Financial Officer & Executive Vice President
September 22, 2016
Financial Update/
Managing the Business

2. All Mail Volume (in billions) First-Class Mail Volume (in billions)
The Great Recession and Electronic Alternatives Severely Impacted Our Business
All Mail Volume (in billions)
First-Class Mail Volume (in billions)
27%
35%
Volume drops result is substantial losses
Fixed infrastructure costs/capped pricing
Rising legacy costs

3. Drivers of Incurred, Recurring Losses
Executive Summary
Despite a demonstrable track record of innovations and improved efficiency, the Postal Service has incurred $57 billion of cumulative losses since the Great Recession
(1)
(2)
(2)
Drivers of Incurred, Recurring Losses
RHB Pre-funding
Declines in First-Class Mail volumes and attendant loss of network density
Lack of pricing flexibility
In 2009, $4.0 billion of RHB Pre-Funding was deferred and will be re-evaluated in 2017
In September 2011, Congress deferred the 2011 required RHB Pre-Funding payment of $5.5 billion until August 2012; it is included in the ($15.9) 2012 figure 3

4. TFP increase every year since 2009
8/28/2018 2:47 PM
In Reaction to Volume Declines, Management Reduced Operational Costs 2007—2015
$15B in Annual savings
TFP increase every year since 2009

5. A Deep Financial Hole as of September 30, 2015
Total liabilities, including retirement obligations exceed assets by $101 billion.
It would take RHB legislative change and decades of annual profits to remedy this level of excess liabilities and unfunded retirement obligations.
Our current business model is not sustainable. To remain viable, the Postal Service must continue to reduce costs and gain the necessary freedom to become profitable and improve efficiency
This slide includes all assets and liabilities of pension and post-retirement health benefits obligations.
Items highlighted in yellow are not shown on our balance sheet under GAAP multi-employer rules and are the OPM’s projected valuation as of September 30, 2015.

6. Our Business is Delivering
Where We Stand in 2016
Our Business is Delivering
First-Class Mail $27.2
Standard Mail $17.2
Shipping & Packages $16.9
Other (incl. Periodicals) $ 5.0
International $ 3.0
Total = $69.3
Volume
Revenue
2016 Plan
(In Billions)
Self-funded, no taxes
% Rev = Retail
% Rev = Commercial
International = 0.9B / $2.8B
Other incl. Periodicals = 6.3B / $5.1B
2015

7. 1 5 154M 630K 31K 215K 300+ Deliver 47% of world’s mail
2016: While Somewhat Smaller, We Remain a Very Large Entity
(Size and Scale are Core to Who We Are)
154M
630K
31K
215K
300+
Deliver 47% of world’s mail
Over 150B pieces per year
Delivery Points
Employees
Post Offices
Vehicles
Processing Centers ,, 1 5 , , ,
Scanning Events Every Day

8. FCM Revenue is Declining
2007—2020
FCM Revenue is Declining
Packages are Growing
While the Postal Service has benefited from its efforts to stabilize Standard Mail volume and increase Packaging and Shipping volume, overall contribution and profit will continue to suffer as lost profits from First-Class Mail are not replaced
Revenue Mix by Product
2007
2015
*2020 (Trending)
FCM shrinking and provides almost 60% of our contribution
FCM switches from almost half of revenue to under one third
Shipping and package volume needs to increase 260% to make up FCM shortfall
Standard mail needs to increase by 135% to make up FCM shortfall
Revenue: $74.9 B
$68.9 B
~ $70+ B
* Indicative, not a forecast 8

9. Managing the Business: Innovation & Internal Competition are the Key!
Western
Northeast
Great
Lakes
Eastern
Capital
Metro
Pacific
Southern
Northeast

10. Managing the Business: Innovation & Internal Competition is the Key!
Greater Boston
Long Island
Triboro
New York
Northern New England
Connecticut
Albany
Westchester
Northern New Jersey
Valley
10 Districts in the
Northeast Area
Key Metrics:
Service statistics
Workhours
Workhour rate
Processing efficiency
Unit total operating expenses
Overtime
Sick/annual leave hours
Earned hours
Complement (career/non-career)
Valley
, ,

11. Operating Results July YTD 2016 Actual vs. SPLY
Preliminary
Operating Results
July YTD 2016 Actual vs. SPLY
1 - Change in Accounting Estimate is excluded from Total Revenue.
2 - Temporary exigent surcharge expired April 10, Estimated exigent revenue earned in April 2016 was immaterial.
3 - Before RHB pre-funding, non-cash adjustments to workers’ compensation liabilities and FERS unfunded liability amortization, which are excluded from controllable expenses.
4 - July YTD FY2016 has 1.5 less retail days and same number of delivery days as compared to FY2015.
5 - Newly available data on prepaid postage resulted in a $1.1B decrease in the liability for deferred revenue - prepaid postage and a corresponding increase in revenue.

12. Operating Results July YTD 2016 Actual vs. SPLY
Preliminary
Operating Results
July YTD 2016 Actual vs. SPLY
1 - Change in Accounting Estimate is excluded from Total Revenue.
2 - Temporary exigent surcharge expired April 10, Estimated exigent revenue earned in April 2016 was immaterial.
3 - Before RHB pre-funding, non-cash adjustments to workers’ compensation liabilities and FERS unfunded liability amortization, which are excluded from controllable expenses.
4 - July YTD FY2016 has 1.5 less retail days and same number of delivery days as compared to FY2015.
5 - Newly available data on prepaid postage resulted in a $1.1B decrease in the liability for deferred revenue - prepaid postage and a corresponding increase in revenue.

13. Operating Results July YTD 2016 Actual vs. SPLY
Preliminary
Operating Results
July YTD 2016 Actual vs. SPLY
1 - Change in Accounting Estimate is excluded from Total Revenue.
2 - Temporary exigent surcharge expired April 10, Estimated exigent revenue earned in April 2016 was immaterial.
3 - Before RHB pre-funding, non-cash adjustments to workers’ compensation liabilities and FERS unfunded liability amortization, which are excluded from controllable expenses.
4 - July YTD FY2016 has 1.5 less retail days and same number of delivery days as compared to FY2015.
5 - Newly available data on prepaid postage resulted in a $1.1B decrease in the liability for deferred revenue - prepaid postage and a corresponding increase in revenue.

14. Total Revenue FY2016 July YTD vs. SPLY:
(including Exigent Surcharge in 2015 & 2016, but excluding one-time change in accounting estimate in 2016)
* FY2015 excludes a one-time, non-recurring accounting adjustment
FY2016 July YTD has 1.5 less retail days as compared to FY2015.
FY2015
$57.9B
FY2016
$59.2B
$1.3B
FCM
Single-Piece
Presort Letters
& Other
Standard
Mail
Total Shipping
& Package
International
Other *
(incl. Periodicals)
* FY2015 excludes a one time non-reoccurring accounting adjustment of $160M
Preliminary

15. Focus on Innovation and Investing in Our Business
Shifts in Mailing Shipping Patterns
Drives Strategy
Focus on Innovation and Investing in Our Business
Retaining First-Class Mail
Digital Integration of Direct Mail
Growing Shipping Business
Service & Efficiency are the Keys 15

16. Next Generation Mailbox Customized Delivery Markets
Informed Delivery App
Ship from Store
(Next Day)
34 major customers with over 16,000 locations and 18.7M Packages
Trips to the door have reduced significantly
Improves customer satisfaction
Give the recipient a view into what they’re receiving that day
Amazon Fresh (Grocery Delivery)
Last week we delivered over 72,000 totes to over 18,000 places
USPS Is Adapting to Changing Expectations
Ship from Store (Next Day)
23 Major Customers
Over 11,200 locations
6.3M packages
Informed Delivery App (Formally Real Mail Notification)
Next Generation Mailbox
Over 85% of the parcels fit in the box
Over 500 boxes currently installed
Trips to the door have reduced from 42% to 12% for these customers
Improves customer satisfaction
Customized Delivery Markets
Averaging 5,849 deliveries with over 26,000 per week

17. Investing in the Future
Informed Visibility
From Induct to Delivery – Giving Customer Visibility of Mail
Mobile Delivery Device
225,000 Fully Deployed (Sept. 2015)
Package Sorting Systems 31 Total (SPSS) Systems
Next Generation Delivery Vehicle Prototype Contracts Awarded
(Sept. 2016)
Investing in our Future:
Informed Visibility:
IV will provide real-time and event-driven mail inventory and predictive workloads
Performance and logistics metrics as they happen, monitor containers at-risk, and receive alerts if anything gets off track.
Mail Inventory Management and Predictive Workloads
End-to-End Measurement of all Mail
Enhanced Real-time Service Performance Diagnostics
Mobile Delivery Device – Rolled out to every delivery route
Next Generation Delivery Vehicles
Prototype Contracts Awarded in November 2015

18. Legislative Platform
Key Stakeholder Support
Retiree Healthcare Medicare Integration
Use Postal Service demographics to determine retirement contributions
Maintain/Reinstate Exigent Price Increase (4.3%)
Obtain Additional Operational Flexibility
Attempt to avoid rate shock by moderate increase and sig cost savings from RHB ,,

19. Postal Regulatory Commission
10-Year Review

20. Objectives for 10-Year Price Review
Maximize incentives to reduce costs and increase efficiency.
Create predictability and stability.
Maintain high quality service standards.
Allow the Postal Service pricing flexibility.
Assure adequate revenues, including retained earnings, to maintain financial stability.
Reduce the administrative burden and increase transparency.
Enhance mail security and deter terrorism.
Establish and maintain a just and reasonable schedule for rates and classifications.
Allocate the total institutional costs appropriately.

21. THANK YOU for your business and partnership!