Financial Update H. Glen Walker Chief Financial Officer & Executive Vice President National Postal Policy Council May 13, 2008

 Service  Financial Results  Outlook Agenda

Service

National Composite Performance Improvement Compared to Last Year Source: IBM Global Business Services Service Standard (Last Year) PQ 2, FY 07 (Current) PQ 2, FY 08Improvement Overnight Two-Day Three-Day Quarterly Service Performance PQ 2, FY 2008 EXFC Quarter 2 FY 2008

District Area FY 07 FY 08 Dakotas Western9798 Big Sky Western9798 Honolulu Pacific9798 Suncoast Southeast Nevada-Sierra Western9698 Colorado/Wyoming Western Top 6 Districts Overnight Composite Source: IBM Global Business Services Quarterly Service Performance PQ 2, FY 2008 EXFC Quarter 2 FY 2008

Top 9 Districts 2-Day Composite Source: IBM Global Business Services District AreaFY 07 FY 08 Alaska Western9797 Portland Western Seattle Western94 96 Suncoast Southeast93 96 South Florida Southeast93 96 Santa Ana Pacific 9296 Los Angeles Pacific 9496 Northern VirginiaCapital Metro San Diego Pacific 9596 Quarterly Service Performance PQ 2, FY 2008 EXFC Quarter 2 FY 2008

Top 4 Districts 3-Day Composite District Area FY 07 FY08 Capital Capital Metro 9294 Baltimore Capital Metro 9194 Northern VirginiaCapital Metro Central New JerseyNew York Metro8994 EXFC Quarter 2 FY 2008 Source: IBM Global Business Services Quarterly Service Performance PQ 2, FY 2008

National Overall Performance - %E/VG/G Percent Ratings (Last Year) PQ 2, FY 07 (Current) PQ 2, FY 08Improvement Overall Performance 92 Maintain Customer Satisfaction QTR 2 FY 2008 Source: IBM Global Business Services Quarterly Service Performance PQ 2, FY 2008

Consumer Trust QTR 2 FY 2008

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 Postal Quarter 2, FY 2008 Quarterly Service Performance PQ 2, FY 2008 Summary of Performance

Financial Results

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

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

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

Income Statement Qtr II, FY 2008 Numbers may not add due to rounding(Data in Millions) 0.3%52 19,578 19,630 Expense 3.1%$584$18,339$18,923Revenue -3.3%-1,72653,02851,302 Volume %SPLYVARSPLYActual Net Income/Loss -$707 -$1,239 $532

Income Statement Qtr II YTD, FY 2008 Numbers may not add due to rounding(Data in Millions) 0.0% 55 39,280 39,335 Expense 3.3%$1,272$38,028$39,300Revenue -3.1%-3,426110,131106,705 Volume %SPLYVARSPLYActual Operating Income/Loss -$35 -$1,252 $1,217 Net Income/Loss -$4,210 $4,175 Prior-Year Escrow $0 $2,958 -$2,958 -$35

Revenue Variance To SPLY ($ in Millions) Commercial$328 Retail309 Total Revenue Variance$584 Other -53 $ $1, Qtr II Qtr II YTD

Qtr II 2008 Volume Volume % SPLY First-Class23.7B-3.1% Standard24.5B-3.0% Periodicals2.2B-4.3% Priority 220M-4.2% Package Svc 279M-4.0% Total All Mail51.3B-3.3% Express 12M -14.3%

Qtr II YTD FY 2008 Volume Volume % SPLY First-Class48.0B-3.5% Standard52.2B-2.8% Periodicals4.4B-1.6% Priority461.0M-4.6% Package Svc 597.0M-3.7% Total All Mail106.7B-3.1% Express 4.0M -12.6%

$ Millions Total Stamp Sales

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

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

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

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

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

Growth from SPLY First Class Mail Volume Q2-YTD Shape

Growth from SPLY Standard Mail Volume Q2-YTD Shape

Expense Variance to SPLY ($ in Millions) Qtr II Total Expense Variance All Other Compensation & Benefits Transportation $ $ YTD $ $ Depreciation & Amortization Vehicle Maintenance Service Qtr II

Outlook

 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 7 th year out of the last 50 years.  Fuel prices remain unpredictable. Challenges – 2 nd Half of Fiscal Year

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

Financial Update H. Glen Walker Chief Financial Officer & Executive Vice President National Postal Policy Council May 13, 2008