Financial UPDATEMailers’ Technical Advisory

Committee Meeting

February 18, 2009

Anthony MorrowManager,

Budget & Financial Analysis

Financial Performance Quarter I Overview

Volume decline of 5.2 billion pieces, or 9.3%, driven by the economic recession

Eighth consecutive quarter of accelerating volume declines

Revenue decline of $1.3 billion compared to Q1, FY 2008

27 million fewer workhours used – reduction of 7.5%

Some cost benefit from low inflation, but significant cost pressure from labor wage increases

Numbers may not add due to rounding(Data in Millions)

-$1,056$ 672-$ 384Net Income -220 19,705 19,485Expense

-$1,276$20,377$19,101RevenueVarSPLYActual

-1.1%

-6.3% %SPLY

Income Statement Quarter I FY 2009

Numbers may not add due to rounding

($ in Millions)

*Mailing Services

Shipping Services

Total Revenue

-$1,235

-42

-$1,276

SPLY Var

$16,761

2,340

$19,101

Revenue

*Includes Interest & Investment Income

Revenue Variance To SPLY Quarter I FY 2009

Volume % SPLY

First-Class 22.7B -7.2%

Standard 24.6B -11.0%

Periodicals 2.1B -3.5%

Mailing Services

0.2B -8.4%

Shipping Services 0.4B -10.5%

Total All Mail 50.2B -9.3%

Category

49.8B -9.3%

Package Services

SPLY Var -1.8B

-3.0B

-0.1B

-0.0B

-0.0B

-5.2B

-5.1B

Numbers may not add due to rounding(Data in Billions)

Quarter I FY 2009 Volumes

Total Mail Volume

2.2%

-1.3%

-3.0%

-5.5%

-9.3%

-0.1%

2.3% 2.3%

-0.6%

-2.1%-3.3%

-6.3%

-1.5%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

8 Quarter Moving Average Growth Rates% SPLY

FY 2006 FY 2007 FY 2008 FY 2009

First-Class Mail Volume

8 Quarter Moving Average Growth Rates% SPLY

FY 2006 FY 2007 FY 2008 FY 2009

-1.3%

-3.9%

-7.2%

-5.5%-4.0%

1.6%

-0.8%

1.2%-0.1%

-2.5% -2.6%-3.1%

-6.9%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Standard Mail Volume

8 Quarter Moving Average Growth Rates% SPLY

FY 2006 FY 2007 FY 2008 FY 2009

4.9%

-11.0%

0.5%

-5.5%

-3.0%

-6.1%

-0.9%

1.2%2.8%2.7%

0.2%

-1.4%-2.6%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Periodicals Volume

% SPLY 8 Quarter Moving Average Growth Rates

FY 2006 FY 2007 FY 2008 FY 2009

-5.3%

-3.5%

-1.8%

-3.3%-4.3%

-2.2%-0.5%-2.2%

-0.6%

0.3% 0.1%

-2.6%

1.2%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Quarterly Volume - % SPLY

Mailing Services Shipping Services

-4.8%

-2.0%

-4.9%

-10.5%

-3.2%-3.1%

-9.3%

-5.6%

-6.4%

-2.1%

2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1

Volume % SPLY

First-Class Letters 21.6B -7.1%Standard Letters 15.3B -12.4%

Standard Flats0.8B -3.8%

Category

9.1B -8.5%First Class Flats

SPLY Var

-1.7B-2.2B

-0.1B-0.8B

Numbers may not add due to rounding(Data in Billions)

Quarter I FY 2009 VolumesBy Shape

Numbers may not add due to rounding

($ in Millions)

Total Expense

All Other

*Total Personnel Comp.

Var

-$220M

-34M

-$12M

Transportation -92M

Supplies & Services -82M

*Includes Retiree Health Benefits

Expense Variance to SPLY Quarter I FY 2009

Actual % SPLYCity Delivery 110.8M -5.2%

Mail Processing 70.9M -13.2%

Customer Services 48.1M -11.3%

All Other

45.6M -3.1%

Total Workhours 331.8M -7.5%

Category

56.4M -3.9%

Rural Delivery

SPLY Var -6.0M

-10.8M

-6.1M

-1.5M

-26.7M

-2.3M

(Data in Millions) Numbers may not add due to rounding

Quarter I FY 2009 Workhours

Total Factor Productivity Quarter I FY 2009

Numbers may not add due to rounding

Actual

-0.3%Total Factor Productivity

-6.3%Resource Usage

-6.6%Workload

LaborMaterials

Capital

Total Price Impact

% SPLY Var

+6.8%+1.1%

+3.8%

+5.6%

*Does not impact TFP calculation, but does impact the Financial Statements

Price Impact of Resources Used Quarter I

No economic recovery expected this year

Projected volume decline of 12 to 15 billion pieces this year

Continued emphasis on reducing costs; $5.9 billion in cost reductions

deployed over FY 2009 - 2010

Financial Outlook

Financial UPDATEMailers’ Technical Advisory

Committee Meeting

February 18, 2009

Anthony MorrowManager,

Budget & Financial Analysis