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USPS Future Business Model

usps Future Business ModelMarch 2, 2010 McKinsey & Company1|Contents Recent context Base case minimal management actions Addressing the challenge Short term requirementsMcKinsey & Company2| usps is experiencing unprecedented losses SOURCE: usps ; 109-435 (PAEA) profit/loss$ billionsPostal Act 2006 signed into lawNote: All years in this document refer to Fiscal Years ending on Sept 301 Includes one-time $4 billion deferral2 Per 2010 Integrated Financial Plan (January Year-to-Date results are favorable to Plan) pre-funding,$ billionsKey drivers Revenue declines due to: E-diversion of First-Class Mail Down-trading from First-Class to Standard Mail Losses of advertising mail due to the recession RHB pre-funding requirement introduced by the PAEA Cost savings, while substantial, have been less than revenue declines due to high fixed costs of the networkNo rate increase 2003-2006 Recent ContextMcKinsey & Company3|Losses

discount rates, future health care costs, the size of the workforce, and period of pre-funding PAEA scheduled pre-funding requirement Employer premiums Recent Context 1 $8.4B scheduled payment includes $3B legacy payment from CSRS 2 $1.4B scheduled payment includes $4B …

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