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FY 2008 Year End Review
MTACNovember 19, 2008
H. Glen WalkerChief Financial Officer & Executive Vice President
2
2
External Environment
Massive deterioration in the housing and financial sectors
The decline in these sectors impacted many other areas of the economy, accelerating the decline
Inflation, driven by fuel prices, increased dramatically until the very end of the year
3
3
Volume dropped 9.5 billion pieces from 2008
High Postal cost inflation driven by fuel prices and Wages Cost of Living Adjustments (COLA)
Internal Environment
4
4
USPS Response
Cost reduction of $2.2B vs. planned $1B
Record service levels
Record customer satisfaction levels
New marketing organization focused on profitable growth
5
5
FY 2008 Financial Results
[ ] = Unfavorable variance to SPLY
Numbers may not add due to rounding.
(Data in Millions)
-$422$ 3,216 $2,794Operating Income (2)
417 71,757 72,174Expense (1)
[-5]$74,973$74,968Revenue
VarSPLYActual[-9,531] 212,234202,703Volume
0.6%
0.0%
%SPLY [-4.5%]
RHBF Payments
Net Loss
$5,600
-$2,806
(1) Excluding RHBF Payments (2) Before RHBF Payments
$8,358
-$5,142 $2,336
-$2,758
6
6
FY 2008 Volume Performance to SPLY
-4.5%-4.8%
-4.3% -4.5%-3.3%
-12.7%
-2.2%
First Class Standard Periodical OtherMailing
ServicesShippingServices Total Mail
91.7B 99.1B 8.6B 1.6B 202.7B1.7B 201.1B
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Total Mail Volume
2.7% 2.4%
-1.5%
2.3% 2.3%
-0.6%-1.3%
-2.1%-3.0%-3.3%
-5.5%-6.3%
-0.3%-0.1%
2.2%1.7%1.2%
5.4%
2.0%
3.5%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
FY 2005 FY 2006 FY 2007FY 2004 FY 2008FY 2005 FY 2006 FY 2007FY 2004 FY 2008
8 Quarter Moving Average Growth Rates8 Quarter Moving Average Growth Rates% SPLY% SPLY
8
8
First-Class Mail Volume
0.3%
-4.0%
1.2%-0.1%
-2.5%-1.3%
-2.6%-3.9%
-5.5%-7.0%
-3.1%-0.6%
-0.5%
-1.1%-2.4%
2.1%
-1.3% -0.6%
1.6%
-0.8%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
FY 2005 FY 2006 FY 2007FY 2004 FY 2008FY 2005 FY 2006 FY 2007FY 2004 FY 2008
8 Quarter Moving Average Growth Rates8 Quarter Moving Average Growth Rates% SPLY% SPLY
9
9
Standard Mail Volume
-0.7%
4.9%
-6.1%
-1.4%
9.3%
-5.5%
-3.0%
1.2%
-0.9%
2.8%2.7%
0.2%
4.6%4.1%
7.9%7.6%8.4%
4.4%
0.5%
-2.6%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
FY 2005 FY 2006 FY 2007FY 2004 FY 2008FY 2005 FY 2006 FY 2007FY 2004 FY 2008
8 Quarter Moving Average Growth Rates8 Quarter Moving Average Growth Rates% SPLY% SPLY
10
10
Periodicals Mail Volume
-5.3%
-2.6%-2.2%
-3.0%
0.9%
-3.3%-4.3%
-2.2%
-0.5%-0.6%
0.3% 0.1%0.2%
-0.7%
-3.1%-3.5%
1.9%
-3.3%-1.8%
1.2%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
FY 2005 FY 2006 FY 2007FY 2004 FY 2008FY 2005 FY 2006 FY 2007FY 2004 FY 2008
8 Quarter Moving Average Growth Rates8 Quarter Moving Average Growth Rates% SPLY% SPLY
11
11
First-Class Mail Volume By Shape
Growth from SPLY
-3.4-2.6
-4.9-6.6
-4.3
-15.3 -14.6-16.1
-14.5 -15.1
QTR 1 QTR 2 QTR 3 QTR 4 YTD
Letters Flats
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12
Standard Mail Volume By Shape
Growth from SPLY
4.62.6
-1.2-3.5
0.7
-13.8-12.6 -13.4
-10.4-12.6
QTR 1 QTR 2 QTR 3 QTR 4 YTD
Letters Flats
13
13
Expense Drivers of Variance To SPLY
$ in Millions
Compensation & Benefits -$601
Total Expense VarianceOther Expenses 392
$417
Transportation 459Depreciation 167
14
14
Total Workhour Savings
-50
-36
-4
11
-22
-53
-76
-23
-11
-85
-75
-65
-55
-45
-35
-25
-15
-5
5
15
2000 2001 2002 2003 2004 2005 2006 2007 2008FY
(Millions)
15
15
Outstanding Debt and Cumulative RHBF Payments
0B 0B
3B
2.1B
8.4B
4.2B
14.0B
7.2B
$0
$2
$4
$6
$8
$10
$12
$14
FY 05 FY 06 FY 07 FY 08
($Billions) Debt (2)RHBF Payments (1)
(1) Cumulative payments (2) Debt outstanding at end of year
Escrow
Escrow (1)
16
16
FY 2008 Summary
Financially challenging year
Volumes down and cost inflation up driven by fuel and labor costs
Revenue flat on last year
Managed by reducing costs $2.2B
Focus on customer service
Organized and focused on growth opportunities
17
17
FY 2009 Outlook
No economic recovery anticipated
Continued volume declines 8 billion pieces
Carryover impact to 2009 from rising inflation in 2008 as well as increases to wages and benefits
Focus on service to our customers and opportunities for growth
Focus on unprecedented across the board cost reductions
FY 2008 Year End Review
MTACNovember 19, 2008
H. Glen WalkerChief Financial Officer & Executive Vice President