FINANCIAL PERFORMANCE JANUARY FY 2005 Richard J Strasser

FINANCIAL PERFORMANCE JANUARY, FY 2005 Richard J. Strasser, Jr. Chief Financial Officer & Executive Vice President

FY 2005 – FINANCIAL PERFORMANCE Summary: October 1, 2004 - January 31, 2005 § Unusually high revenue/volume growth in November § Slight revenue/volume growth in October and December § Slight revenue/volume decline in January § Increased expenses due to cost inflation and additional volumes and deliveries § High productivity increase held down expenses § Net income below last year, but over plan

FY 2005 – FINANCIAL PERFORMANCE Income Statement – January 2005 Actual Revenue Plan Var %Plan SPLY $5, 815 $5, 723 +92 +1. 6 -0. 8% Expense Net Income $ 5, 673 5, 795 -122 143 -$ 72 +215 Numbers may not add due to rounding ($ Millions) -2. 1 +1. 8% $ 290

FY 2005 – FINANCIAL PERFORMANCE Volume Compared to SPLY +2. 8 B January Quarter 1 53. 8 B SPLY +3. 9% January Quarter 1 +5. 5% 56. 8 B Actual

FY 2005 – FINANCIAL PERFORMANCE Volume - Percent Change to SPLY January YTD +3. 9% AUG SEP FY 2004 NOV OCT FY 2005 DEC Quarter 1 +5. 5% JAN

FY 2005 – FINANCIAL PERFORMANCE Revenue Compared to SPLY – January YTD Actual

FY 2005 – FINANCIAL PERFORMANCE Volume and Revenue - Change to SPLY- Jan YTD Volume Revenue FY 2005 Change First-Class Standard 35. 1 B 34. 7 B +0. 7% +7. 5% -$40 M +$382 M Periodicals 3. 0 B -0. 1% -$2 M 17. 9 M +0. 6% +$1 M Priority 309. 9 M +2. 6% +$38 M Package Serv. Other 416. 5 M 0. 6 B +0. 3% +16. 7% -$10 M +$131 M 74. 1 B +3. 9% +$500 M Express Total

FY 2005 – FINANCIAL PERFORMANCE Income Statement – January Year-to-date Actual Revenue Expense Plan Var %Plan SPLY $24, 602 $23, 893 +709 +3. 0 +2. 1% 22, 810 23, 041 -231 -1. 0 +3. 7% Net Income $ 1, 792 $ Numbers may not add due to rounding ($ Millions) 852 +940 $ 2, 100

FY 2005 – FINANCIAL PERFORMANCE Deliveries – January 2005 Deliveries Change From SPLY 143. 0 M 1. 8 M

FY 2005 – FINANCIAL PERFORMANCE Workhours - Change to SPLY - January YTD 3. 4 M 2. 3 M Increased Volume/Deliveries Savings Actual

FY 2005 – FINANCIAL PERFORMANCE Total Factor Productivity Defined Change in Combined Workload = Change in Resources Used

FY 2005 – FINANCIAL PERFORMANCE Total Factor Productivity – January YTD Change in Combined Workload 2. 6% = 2. 2% 0. 4% Change in Resources Used

FY 2005 – FINANCIAL PERFORMANCE Productivity Components – January YTD 5. 9% Workload Growth TFP 2. 2% Cost Inflation 3. 3% Actual Expense 3. 7%

FY 2005 – FINANCIAL PERFORMANCE Total Factor Productivity Cumulative 1972 – 2005 FY Percent Growth * *January YTD

FY 2005 – FINANCIAL PERFORMANCE FY 2005 Quarter 2 – Summary Outlook Quarter 2 Volume FY 2004 Forecast 51. 5 B Outlook 51. 1 B Above Forecast Revenue $17. 3 B $17. 0 B Above Forecast Expenses $16. 6 B $17. 2 B Below Forecast Net Income/Loss +$0. 7 B -$0. 2 B Above Forecast

PL 108 -18 RATE FILING

PUBLIC LAW 108 -18 Escrow Account and Use of “Savings” § Escrow Requirement Recreates Over-Funding § $3. 1 B Required to Fund FY 2006 Escrow And Annual Funding Requirement Increases to $5. 4 B in FY 2015 § USPS Recommended Elimination of Escrow Requirement

PUBLIC LAW 108 -18 USPS Proposal On “Savings” Preferred - With Military Service Costs Returned to Treasury: § Pre-Fund Postretirement Health Benefit Costs of All Employees and Retirees § Eliminate Escrow Requirement – USPS Would Be Only Agency Pre-Funding Pension and Retiree Health Benefit Costs