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

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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

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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

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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

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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

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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

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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

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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

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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

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13

Expense Drivers of Variance To SPLY

$ in Millions

Compensation & Benefits -$601

Total Expense VarianceOther Expenses 392

$417

Transportation 459Depreciation 167

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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)

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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)

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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

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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