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Service Financial Results Outlook

Service Financial Results Outlook. Agenda. Service. EXFC Quarter 2 FY 2008. National Composite Performance Improvement Compared to Last Year. Quarterly Service Performance PQ 2, FY 2008. Source: IBM Global Business Services. District Area FY 07 FY 08

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Service Financial Results Outlook

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  1. Service Financial Results Outlook Agenda

  2. Service

  3. EXFC Quarter 2 FY 2008 National Composite Performance Improvement Compared to Last Year Quarterly Service Performance PQ 2, FY 2008 Source: IBM Global Business Services

  4. DistrictAreaFY 07FY 08 Dakotas Western 97 98 Big Sky Western 97 98 Honolulu Pacific 97 98 Suncoast Southeast 95 98 Nevada-Sierra Western 96 98 Colorado/Wyoming Western 96 98 EXFC Quarter 2 FY 2008 Top 6 Districts Overnight Composite Quarterly Service Performance PQ 2, FY 2008 Source: IBM Global Business Services

  5. DistrictAreaFY 07FY 08 Alaska Western 97 97 Portland Western 94 96 Seattle Western 94 96 Suncoast Southeast 93 96 South Florida Southeast 93 96 Santa Ana Pacific 92 96 Los Angeles Pacific 94 96 Northern Virginia Capital Metro 92 96 San Diego Pacific 95 96 EXFC Quarter 2 FY 2008 Top 9 Districts 2-Day Composite Quarterly Service Performance PQ 2, FY 2008 Source: IBM Global Business Services

  6. DistrictAreaFY 07FY08 Capital Capital Metro 92 94 Baltimore Capital Metro 91 94 Northern Virginia Capital Metro 91 94 Central New Jersey New York Metro 89 94 EXFC Quarter 2 FY 2008 Top 4 Districts 3-Day Composite Quarterly Service Performance PQ 2, FY 2008 Source: IBM Global Business Services

  7. Customer Satisfaction QTR 2 FY 2008 National Overall Performance - %E/VG/G Quarterly Service Performance PQ 2, FY 2008 Source: IBM Global Business Services

  8. Consumer Trust QTR 2 FY 2008

  9. Overnight Service Performance 96 percent Two-day Service Performance 94 percent Three-day Service Performance 92 percent Residential Customer Satisfaction 92 percent Excellent/Very Good/Good Summary of Performance Postal Quarter 2, FY 2008 Quarterly Service Performance PQ 2, FY 2008

  10. Financial Results

  11. Volumes down on last year for all mail classes Economy Last price increase under old regulatory system Rising fuel costs Financial Performance Overview

  12. Intense Focus on Cost Reductions Work Hours and Rates Transportation Headquarters Real Estate Our Reaction To This Environment

  13. Growth Initiatives Express, Priority, Ground Packages Returns Parcel Select Mailing Services Business Development Teams Managed Accounts Our Reaction To This Environment

  14. Actual SPLY VAR %SPLY Volume 51,302 53,028 -1,726 -3.3% Revenue $18,923 $18,339 $584 3.1% 19,630 19,578 52 0.3% Expense $532 -$707 -$1,239 Net Income/Loss Income Statement Qtr II, FY 2008 (Data in Millions) Numbers may not add due to rounding

  15. Actual SPLY VAR %SPLY Volume 106,705 110,131 -3,426 -3.1% Revenue $39,300 $38,028 $1,272 3.3% 39,335 39,280 55 0.0% Expense $1,217 -$35 -$1,252 Operating Income/Loss -$2,958 $0 $2,958 Prior-Year Escrow $4,175 -$4,210 Net Income/Loss -$35 (Data in Millions) Numbers may not add due to rounding Income StatementQtr II YTD, FY 2008

  16. Qtr II YTD Qtr II ($ in Millions) Commercial $328 $799 Retail 309 509 Other -53 -36 Total Revenue Variance $584 $1,272 Revenue Variance To SPLY

  17. Volume % SPLY First-Class 23.7B -3.1% Standard 24.5B -3.0% Periodicals 2.2B -4.3% -14.3% 12M Express Priority 220M -4.2% Package Svc 279M -4.0% Total All Mail 51.3B -3.3% Qtr II 2008 Volume

  18. Volume % SPLY First-Class 48.0B -3.5% Standard 52.2B -2.8% Periodicals 4.4B -1.6% 4.0M -12.6% Express Priority 461.0M -4.6% Package Svc 597.0M -3.7% Total All Mail 106.7B -3.1% Qtr II YTD FY 2008 Volume

  19. Total Stamp Sales $ Millions

  20. FY 2004 FY 2006 FY 2007 FY 2008 FY 2005 % SPLY 8 Quarter Moving Average Growth Rates Total Mail Volume

  21. FY 2004 FY 2006 FY 2007 FY 2008 FY 2005 % SPLY 8 Quarter Moving Average Growth Rates First-Class Mail Volume

  22. FY 2004 FY 2006 FY 2007 FY 2008 FY 2005 % SPLY 8 Quarter Moving Average Growth Rates Standard Mail Volume

  23. FY 2004 FY 2006 FY 2007 FY 2008 FY 2005 % SPLY 8 Quarter Moving Average Growth Rates Priority Mail Volume

  24. FY 2004 FY 2006 FY 2007 FY 2008 FY 2005 % SPLY 8 Quarter Moving Average Growth Rates Periodicals Mail Volume

  25. First Class Mail Volume Q2-YTD Shape Growth from SPLY

  26. Standard Mail Volume Q2-YTD Shape Growth from SPLY

  27. Qtr II YTD Qtr II ($ in Millions) Compensation & Benefits -$435 -$168 175 Transportation 173 47 Depreciation & Amortization 130 19 Vehicle Maintenance Service 65 All Other 21 122 Total Expense Variance $52 $55 Expense Variance to SPLY

  28. Outlook

  29. Volatile Economy – credit, financial and housing sectors account for the largest portion of the volume decline, with no turn around in sight. Full year volumes are projected to be down for only the 7th year out of the last 50 years. Fuel prices remain unpredictable. Challenges – 2nd Half of Fiscal Year

  30. Intense Focus on Cost Reductions Optimize All Growth Opportunities Challenges – 2nd Half of Fiscal Year Requires us to hope for the best but plan for the worst:

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