Richard J. Strasser, Jr.Chief Financial Officer &Executive Vice President

FINANCIAL PERFORMANCE

JANUARY, FY 2005

FINANCIAL PERFORMANCE

JANUARY, FY 2005

FY 2005 – FINANCIAL PERFORMANCEFY 2005 – FINANCIAL PERFORMANCESummary: October 1, 2004 - January 31, 2005Summary: 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

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 PERFORMANCEFY 2005 – FINANCIAL PERFORMANCEIncome Statement – January 2005Income Statement – January 2005

Numbers may not add due to rounding($ Millions)Numbers may not add due to rounding($ Millions)

ActualActual Var Var %Plan%PlanPlan Plan SPLYSPLY

RevenueRevenue $5,815 $5,815 +92 +92 +1.6 +1.6 $5,723 $5,723 -0.8%-0.8%

ExpenseExpense 5,673 5,673 -122 -122 -2.1 -2.1 5,795 5,795 +1.8%

Net IncomeNet Income $ 143$ 143 +215 +215 -$ 72 -$ 72 $ 290$ 290

FY 2005 – FINANCIAL PERFORMANCEFY 2005 – FINANCIAL PERFORMANCEVolume Compared to SPLYVolume Compared to SPLY

71.4B 74.1B71.4B 74.1B

ActualActual

+2.8B+2.8B

+3.9%+3.9%

SPLYSPLY

Quarter 1 Quarter 1

53.8B 56.8B

January January

+5.5%+5.5%

FY 2005 – FINANCIAL PERFORMANCEFY 2005 – FINANCIAL PERFORMANCEVolume - Percent Change to SPLYVolume - Percent Change to SPLY

January YTD +3.9%January YTD +3.9%

FY 2005FY 2005Quarter 1 +5.5%Quarter 1 +5.5%

NOVNOV DECDEC JANJANOCTOCTSEPSEP

5.4% 4.4%

1.2%

15.0%

1.6%

-1.0%

FY 2004FY 2004AUGAUG

FY 2005 – FINANCIAL PERFORMANCEFY 2005 – FINANCIAL PERFORMANCE

-3.8%-2.9%

5.1%

1.3%

2.4%

5.0%

-0.9%

-2.7%

2.1%

6.2%

-1.2%-0.3%

Total First-Class Priority Standard Packages All Other

Plan Actual

Revenue Compared to SPLY – January YTDRevenue Compared to SPLY – January YTD

FY 2005 – FINANCIAL PERFORMANCEFY 2005 – FINANCIAL PERFORMANCEVolume and Revenue - Change to SPLY- Jan YTDVolume and Revenue - Change to SPLY- Jan YTD

+3.9%+3.9%74.1B74.1BTotalTotal +$500M+$500M

+7.5%+7.5%34.7B34.7BStandardStandard +$382M+$382M

-0.1% -0.1%3.0B3.0BPeriodicalsPeriodicals -$2M-$2M

+0.3%+0.3%416.5M416.5MPackage Serv.Package Serv. -$10M-$10M

+2.6%+2.6%309.9M309.9MPriorityPriority +$38M+$38M

+0.6%+0.6%17.9M17.9MExpressExpress +$1M+$1M

-$40M-$40M

Revenue Change

Revenue Change

+0.7%+0.7%35.1B35.1BFirst-ClassFirst-Class

ChangeChangeFY 2005FY 2005 Volume Volume

OtherOther +$131M+$131M+16.7%+16.7%0.6B0.6B

FY 2005 – FINANCIAL PERFORMANCEFY 2005 – FINANCIAL PERFORMANCEIncome Statement – January Year-to-dateIncome Statement – January Year-to-date

Numbers may not add due to rounding($ Millions)Numbers may not add due to rounding($ Millions)

ActualActual Var Var %Plan%PlanPlan Plan SPLYSPLY

RevenueRevenue $24,602 $24,602 +709 +709 +3.0 +3.0 $23,893 $23,893 +2.1%+2.1%

ExpenseExpense 22,810 22,810 -231 -231 -1.0 -1.0 23,041 23,041 +3.7%+3.7%

Net IncomeNet Income $ 1,792$ 1,792 +940+940 $ 852 $ 852 $ 2,100$ 2,100

FY 2005 – FINANCIAL PERFORMANCEFY 2005 – FINANCIAL PERFORMANCEDeliveries – January 2005Deliveries – January 2005

Deliveries 143.0MDeliveries 143.0M

Change From SPLY Change From SPLY 1.8M 1.8M

FY 2005 – FINANCIAL PERFORMANCEFY 2005 – FINANCIAL PERFORMANCE

2.3M2.3M

Workhours - Change to SPLY - January YTDWorkhours - Change to SPLY - January YTD

1.1M1.1M

ActualActual

SavingsSavings

Increased Volume/DeliveriesIncreased Volume/Deliveries

3.4M3.4M

FY 2005 – FINANCIAL PERFORMANCEFY 2005 – FINANCIAL PERFORMANCE

Change in Combined Workload

Change in Resources

Used

Total Factor Productivity DefinedTotal Factor Productivity Defined

==

FY 2005 – FINANCIAL PERFORMANCEFY 2005 – FINANCIAL PERFORMANCE

Change in Combined Workload

Change in Resources

Used

2.6%0.4%

2.2%

Total Factor Productivity – January YTDTotal Factor Productivity – January YTD

==

FY 2005 – FINANCIAL PERFORMANCEFY 2005 – FINANCIAL PERFORMANCEProductivity Components – January YTDProductivity Components – January YTD

2.6%

CostInflation

Workload Growth

TFPTFP

5.9%5.9% 5.9%5.9%

3.3%

Actual Expense

3.7%

2.2%2.2%

FY 2005 – FINANCIAL PERFORMANCEFY 2005 – FINANCIAL PERFORMANCETotal Factor ProductivityTotal Factor Productivity

0

2

4

6

8

10

12

14

16

18

20

71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05

Percent GrowthPercent Growth *January YTD*January YTD**

Cumulative 1972 – 2005Cumulative 1972 – 2005

FY

FY 2005 – FINANCIAL PERFORMANCEFY 2005 – FINANCIAL PERFORMANCEFY 2005 Quarter 2 – Summary OutlookFY 2005 Quarter 2 – Summary Outlook

Above ForecastAbove Forecast

$17.2B $17.2B

-$0.2B -$0.2B Above Forecast Above Forecast

$17.0B $17.0B

51.1B 51.1B

ForecastForecast

Expenses Expenses $16.6B $16.6B

Net Income/Loss Net Income/Loss +$0.7B +$0.7B

Revenue Revenue $17.3B $17.3B

Below ForecastBelow Forecast

Volume Volume 51.5B 51.5B

FY 2004 FY 2004Quarter 2Quarter 2 OutlookOutlook

Above ForecastAbove Forecast

PL108-18

RATE FILING

PL108-18

RATE FILING

Escrow Requirement Recreates Over-Funding

$3.1B Required to Fund FY 2006 EscrowAnd Annual Funding Requirement Increases to $5.4B in FY 2015

USPS Recommended Elimination of Escrow

Requirement

PUBLIC LAW 108-18PUBLIC LAW 108-18 Escrow Account and Use of “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

PUBLIC LAW 108-18PUBLIC LAW 108-18 USPS Proposal On “Savings”