Open Session - USPS...Before RHB pre -funding, FERS unfunded liability amortization, and non cash...

®

1 November 13, 2015

Open Session

Board of Governors Temporary Emergency Committee Meeting

November 13, 2015

Washington, DC

Financial Results Fiscal Year 2015

Open Session Temporary Emergency Committee

November 13, 2015

2

1 - Estimated.

2 - Before RHB pre-funding, FERS unfunded liability amortization, and non-cash adjustments to workers’ compensation liabilities.

September YTD (12 Months) FY FY(Billions) 2015 2014Revenue (Excluding Temporary Exigent Surcharge) 66.8$ 66.4$

Temporary Exigent Surcharge 1 2.1 1.4

Total Revenue 68.9 67.8 Expenses 2 67.7 66.4

Controllable Income (Loss) 2 1.2 1.4 Retiree Health Benefits Pre-Funding (5.7) (5.7) FERS Unfunded Liability Amortization (0.2) - Workers' Comp. Fair Value Adj. (0.8) (0.5) Workers' Comp. Other Non-Cash Adj. 0.4 (0.7)

Net Income (Loss) (5.1)$ (5.5)$

Financial Results: Total Revenue

3

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

FCM Single-Piece FCM PresortLetters & Other

Standard Mail Other (includesPeriodicals)

Total Shipping &Package

International Mail

21.7

42.1

80.3

6.5 4.0

0.9

20.6

41.9

80.0

6.3 4.5 0.9

Piec

es -

Billi

ons

FY2014 FY2015

FY2014 155.5

FY2015 154.2

YTD FY2015 has the same number of weekdays, Saturdays, & Sundays as compared to YTD FY2014.

Volume: September YTD FY2015 vs. SPLY

-5.5% -0.5% -0.3% -4.5% 14.1% 5.2% % Change

4

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

$16.0

$18.0

$20.0

FCM Single-Piece FCM PresortLetters & Other

Standard Mail Other (includesPeriodicals)

Total Shipping &Package

International Mail

$10.6

$17.9 $17.4

$5.5

$13.5

$2.9

$10.2

$18.1 $17.6

$5.1

$15.1

$2.8

$ Bi

llion

s

FY2014 FY2015

FY2014 $67.8

FY2015 $68.9

YTD FY2015 has the same number of weekdays, Saturdays, & Sundays as compared to YTD FY2014.

Includes Exigent Surcharge

Revenue including Exigent Surcharge: September YTD FY2015 vs. SPLY

-2.9% 1.2% 1.3% -7.3% 11.4% -5.5% % Change

5

1 - Estimated.

2 - Before RHB pre-funding, FERS unfunded liability amortization, and non-cash adjustments to workers’ compensation liabilities.

September YTD (12 Months) FY FY(Billions) 2015 2014Revenue (Excluding Temporary Exigent Surcharge) 66.8$ 66.4$

Temporary Exigent Surcharge 1 2.1 1.4

Total Revenue 68.9 67.8 Expenses 2 67.7 66.4

Controllable Income (Loss) 2 1.2 1.4 Retiree Health Benefits Pre-Funding (5.7) (5.7) FERS Unfunded Liability Amortization (0.2) - Workers' Comp. Fair Value Adj. (0.8) (0.5) Workers' Comp. Other Non-Cash Adj. 0.4 (0.7)

Net Income (Loss) (5.1)$ (5.5)$

Financial Results: Expenses

6

September YTD (12 Months) FY FY(Billions) 2015 2014Compensation & Benefits $51.8 $50.4

Transportation 6.6 6.6

Depreciation 1.8 1.8

Supplies & Services 2.7 2.6

Rent, Utilities & Other 4.8 5.0

Controllable Expenses $67.7 $66.4

Workhours (Millions) 1,128 1,107

1, 2

1 - Delivery days were even compared to SPLY.

2 - Excludes RHB pre-funding, FERS unfunded liability amortization, and non-cash adjustments to workers’ compensation liabilities.

1, 2

Controllable Expenses

7

1 - Estimated.

2 - Before RHB pre-funding, FERS unfunded liability amortization, and non-cash adjustments to workers’ compensation liabilities.

September YTD (12 Months) FY FY(Billions) 2015 2014Revenue (Excluding Temporary Exigent Surcharge) 66.8$ 66.4$

Temporary Exigent Surcharge 1 2.1 1.4

Total Revenue 68.9 67.8 Expenses 2 67.7 66.4

Controllable Income (Loss) 2 1.2 1.4 Retiree Health Benefits Pre-Funding (5.7) (5.7) FERS Unfunded Liability Amortization (0.2) - Workers' Comp. Fair Value Adj. (0.8) (0.5) Workers' Comp. Other Non-Cash Adj. 0.4 (0.7)

Net Income (Loss) (5.1)$ (5.5)$

Financial Results: Net Loss

8

9

CSRS Fund Balance $179.2B CSRS Actuarial Liability $199.6B

FERS Fund Balance $107.6B FERS Actuarial Liability $111.3B

RHB Fund Balance $50.3B Retiree Health Benefits Obligation $105.2B

Total Retirement-Fund Assets $337.1B Total Retirement-Related Liabilities $416.1B

Workers' Compensation $18.8B

Debt $15.0B

Unrestricted Cash $6.6B Accrued Compensation, $3.9Bbenefits, and leave

Land, Buildings & Equipment, net $15.7B Deferred Revenue $3.3B

Other Assets $1.7B Other $5.3B

Total Assets $361.1B Total Liabilities $462.4B

As of September 30, 2015

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.

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.

A Deep Financial Hole – September 2015 Assets & Liabilities (including retirement accounts)

9

FY2016 Integrated Financial Plan

Open Session

Temporary Emergency Committee

November 13, 2015

10

Request approval of the following:

1. FY2016 Integrated Financial Plan and Capital Plan 2. FY2016 Borrowing and Financing Resolution

3. FY2017 Congressional Reimbursement

(Appropriations) Request

Approval Items

11

FY2016 IFP Financials including Capital Plan

FY2016 Borrowing Authority

FY2017 Congressional Reimbursement

Agenda

12

13

CSRS Fund Balance $179.2B CSRS Actuarial Liability $199.6B

FERS Fund Balance $107.6B FERS Actuarial Liability $111.3B

RHB Fund Balance $50.3B Retiree Health Benefits Obligation $105.2B

Total Retirement-Fund Assets $337.1B Total Retirement-Related Liabilities $416.1B

Workers' Compensation $18.8B

Debt $15.0B

Unrestricted Cash $6.6B Accrued Compensation, $3.9Bbenefits, and leave

Land, Buildings & Equipment, net $15.7B Deferred Revenue $3.3B

Other Assets $1.7B Other $5.3B

Total Assets $361.1B Total Liabilities $462.4B

As of September 30, 2015

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.

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.

A Deep Financial Hole – September 2015 Assets & Liabilities (including retirement accounts)

13

1 Before RHB pre-funding, FERS unfunded liability amortization, and non-cash adjustments to workers’ compensation liabilities.

FY FY IFP2014 (Billions) 2015 2016

66.4$ Revenue (Excluding Temporary Exigent Surcharge) 66.8$ 68.2$ 1.4 Temporary Exigent Surcharge 2.1 1.1

67.8 Total Revenue 68.9 69.3 66.4 Expenses 1 67.7 69.2

1.4 Controllable Income (Loss) 1 1.2 0.1 (5.7) Retiree Health Benefits Pre-Funding (5.7) (5.8)

- FERS Unfunded Liability Amortization (0.2) (0.2) (0.5) Workers' Comp. Fair Value Adj. (0.8) - (0.7) Workers' Comp. Other Non-Cash Adj. 0.4 -

(5.5)$ Net Income (Loss) (5.1)$ (5.9)$ 156 Volume (Pieces) 154 151

1,107 Workhours (Millions) 1,128 1,121

Profit & Loss Comparison: Total Revenue

14

Revenue Trend FY2014-FY2016 including Exigent Surcharge

FY2015 $68.9

FY2014 $67.8

FY2016 IFP $69.3

• Exigent Rollback March/April 2016 negative impact $1.0B (FY2015 vs FY2016) • Exigent Surcharge amounts – FY2014 $1.4B / FY2015 $2.1B / FY2016 $1.1B

-2.9%

-5.5%

1.2%

-3.1%

1.3%

-2.7% -7.3%

-2.1%

11.4%

12.0%

-5.5%

10.0%

% Change

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

$16.0

$18.0

$20.0

FCM Single-Piece FCM PresortLetters & Other

Standard Mail Other (includesPeriodicals)

Total Shipping &Package

International Mail

$10.6

$17.9 $17.4

$5.5

$13.5

$2.9

$10.2

$18.1 $17.6

$5.1

$15.1

$2.8

$9.7

$17.5 $17.2

$5.0

$16.9

$3.0

$ Bi

llion

s

FY2014 FY2015 Prelim FY2016 IFP

15

1 Before RHB pre-funding, FERS unfunded liability amortization, and non-cash adjustments to workers’ compensation liabilities.

FY FY IFP2014 (Billions) 2015 2016

66.4$ Revenue (Excluding Temporary Exigent Surcharge) 66.8$ 68.2$ 1.4 Temporary Exigent Surcharge 2.1 1.1

67.8 Total Revenue 68.9 69.3 66.4 Expenses 1 67.7 69.2

1.4 Controllable Income (Loss) 1 1.2 0.1 (5.7) Retiree Health Benefits Pre-Funding (5.7) (5.8)

- FERS Unfunded Liability Amortization (0.2) (0.2) (0.5) Workers' Comp. Fair Value Adj. (0.8) - (0.7) Workers' Comp. Other Non-Cash Adj. 0.4 -

(5.5)$ Net Income (Loss) (5.1)$ (5.9)$ 156 Volume (Pieces) 154 151

1,107 Workhours (Millions) 1,128 1,121

Profit & Loss Comparison: Expenses

16

Bridging the $1.5B Controllable Expense Gap of $67.7B in FY2015 to the Projected $69.2B in FY2016

$67.7

$69.2

$62.0

$63.0

$64.0

$65.0

$66.0

$67.0

$68.0

$69.0

$70.0

$71.0

FY2015 ProjectedControllable

Expenses

GI/COLA/Step RHB/Health Benefit FERS Contribution Add'l Day/DeliveryPts

TransportationIncrease

Supplies & Services(HQ Prgms)

Rent/Fuel/Maint Other WorkhourReduction

Rate Savings FY2016 Prelim IFPControllable

Expenses

($ B

illio

ns)

$1.1B in Upward Wage Pressure

0.7

0.1 0.4 0.3

0.3 0.3

0.2

(0.5) (0.6)

Cost Increases Expected to Outweigh Savings in FY2016

Total Cost Increases + $2.6B Total Savings ($1.1)B

0.3

17

1 Before RHB pre-funding, FERS unfunded liability amortization, and non-cash adjustments to workers’ compensation liabilities.

FY FY IFP2014 (Billions) 2015 2016

66.4$ Revenue (Excluding Temporary Exigent Surcharge) 66.8$ 68.2$ 1.4 Temporary Exigent Surcharge 2.1 1.1

67.8 Total Revenue 68.9 69.3 66.4 Expenses 1 67.7 69.2

1.4 Controllable Income (Loss) 1 1.2 0.1 (5.7) Retiree Health Benefits Pre-Funding (5.7) (5.8)

- FERS Unfunded Liability Amortization (0.2) (0.2) (0.5) Workers' Comp. Fair Value Adj. (0.8) - (0.7) Workers' Comp. Other Non-Cash Adj. 0.4 -

(5.5)$ Net Income (Loss) (5.1)$ (5.9)$ 156 Volume (Pieces) 154 151

1,107 Workhours (Millions) 1,128 1,121

Profit & Loss Comparison: Controllable Income (Loss)

18

Capital Commitments5 - Year Avg. FY2014 FY2015 FY2015 FY2016

In Billions ('10-'14) Actual Plan Actual Plan

Facilities $0.4 $0.3 $0.4 $0.4 $0.4

MP Equipment $0.2 $0.3 $0.8 $0.6 $0.5

Vehicles $0.0 $0.1 $0.5 $0.6 $0.2

IT & Other $0.1 $0.2 $0.5 $0.2 $0.7

Total $0.7 $0.9 $2.2 $1.8 $1.8

FY2016 Capital Commitments Plan

19

Capital Cash Outlays5 - Year Avg. FY2014 FY2015 FY2015 FY2016

In Billions ('10-'14) Actual Plan Actual Plan

Facilities $0.5 $0.4 $0.5 $0.4 $0.4

MP Equipment $0.4 $0.3 $0.7 $0.5 $0.5

Vehicles $0.0 $0.0 $0.4 $0.1 $0.4

IT & Other $0.1 $0.1 $0.4 $0.2 $0.5

Total $1.0 $0.8 $2.0 $1.2 $1.8

FY2016 Capital Cash Outlay Plan

20

FY2015 - FY2016 Liquidity Days of Operating Cash Available

(1)0123456789

101112131415161718192021222324252627282930

Sep-

14

Oct

-14

Nov

-14

Dec

-14

Jan-

15

Feb-

15

Mar

-15

Apr

-15

May

-15

Jun-

15

Jul-1

5

Aug

-15

Sep-

15

Oct

-15

Nov

-15

Dec

-15

Jan-

16

Feb-

16

Mar

-16

Apr

-16

May

-16

Jun-

16

Jul-1

6

Aug

-16

Sep-

16

Oct

-16

• Liquidity includes unrestricted cash plus available borrowing, up to $15B limit

• FY2015 Days of Operating Cash – based on average operating costs disbursed per day ~$270M

• FY2016 Days – based on ~$275M

Mid-October Balances shown - Low points after annual Workers’

Compensation payments to DOL

Without Retiree Health Benefits (RHB) Pre-Funding for 2015 ($5.7B) and no payment in 2016 ($5.8B)

Days

Actual

FY2015 FY2016

3 bi-weekly pay-days

3 bi-weekly pay-days

$ 1 B

$ 2 B

$ 4 B

$ 3 B

24 days

FY2016 IFP

$ 5 B

$ 6 B

$ 7 B

$ 8 B

$ 0 B

25 days

21

FY2016 IFP Financials including Capital Plan

FY2016 Borrowing Authority

FY2017 Congressional Reimbursement

Agenda

22

Management Recommendation:

Approve resolution authorizing issuance of debt through

November 30, 2016, within statutory limits and up to a

maximum of $15B.

Borrowing & Financing Resolution

23

FY2016 IFP Financials including Capital Plan

FY2016 Borrowing Authority

FY2017 Congressional Reimbursement

Agenda

24

(1) Forward funded to FY2017 (funds due to be available October 2016). Congressional committee recommendation set pending amount at $67.2M. FY2016 President’s Budget not yet enacted.

(2) OMB proposal based on 5-year rolling average. USPS request based on forecasted volume and cost.

(3) Reconciliation adjustment due to OMB/Congressional appropriation exceeding actual volume.

(4) Requesting Congress to reimburse USPS for annual appropriations authorized by 1993 Revenue Forgone Reform Act not received in prior years.

($Millions) FY2016 FY2016 FY2017USPS OMB Preliminary

Reimbursements to cover: Request Proposal Request

Free Mail for the Blind 1, 2 $49.2 N/A $51.3

Overseas Voting 1, 2 0.8 N/A 0.8

Reconciliation Adjustments (prior years) 3 -23.8 N/A -14.6

Total Reimbursements: Free Mail for Blind & Overseas Voting Revenue Forgone 1993 Act Installments 4 162.2 --- 162.2Total Appropriation Requested 188.3 199.7Total Appropriation Expected October 2016 67.2

37.467.226.1

FY2017 Congressional Reimbursement

25

Request approval of the following:

1. FY2016 Integrated Financial Plan and Capital Plan 2. FY2016 Borrowing and Financing Resolution

3. FY2017 Congressional Reimbursement

(Appropriations) Request

Approval Items

26

®

Quarterly Service Performance Report

Temporary Emergency Committee Meeting

Open Session November 13, 2015

David E. Williams Chief Operating Officer

27

Quarter 4 Performance

Leverage our Infrastructure

Employee Commitment

Predictable Service

28

®

FIRST-CLASS MAIL

SERVICE PERFORMANCE

Quarter 4, Fiscal Year 2015

29

Actual SPLY

100 -

90 -

80 -

70 -

60 -

50 -

First-Class Overnight Target 96.80

96.24 96.88

Quarter 4, Fiscal Year 2015

30

Actual SPLY

Target 96.50

100 -

90 -

80 -

70 -

60 -

50 -

First-Class 2-Day

94.81 96.77

Quarter 4, Fiscal Year 2015

31

Actual SPLY

Target 95.25

100 -

90 -

80 -

70 -

60 -

50 -

First-Class 3-5 Day

89.00 94.05

Quarter 4, Fiscal Year 2015

32

®

STANDARD MAIL

SERVICE PERFORMANCE

Quarter 4, Fiscal Year 2015

33

Standard Mail Composite

Actual SPLY

Target 91.00

100 -

90 -

80 -

70 -

60 -

50 -

Quarter 4, Fiscal Year 2015

91.76 93.33

34

Summary

Predictable Service

Drive Process Improvement

Employee and Industry Engagement

35

Confidential & Pre-Decisional 36 DISCUSSION DRAFT January 8, 2014