# Presentation: 677615

## Mailers’ Technical Advisory Committee Meeting

May 16, 2007

**Chief Financial Officer &**
**Executive Vice President**

- FINANCIAL UPDATE

**Mailers’ Technical Advisory Committee Meeting**
**May 16, 2007**

- MTAC

## Income Statement – Qtr 2, FY 2007

|  | Actual | SPLY | VAR | %SPLY |
| --- | --- | --- | --- | --- |
| Volume |   53,020 | 53,320 | -300 |   -0.6% |
| Revenue | $18,354 | $18,652 | -$298 |   -1.6% |
| Expense |   18,549 |   17,806 | 743 |   4.2% |
| Income from Operations | -$195 | $846 | -$1,041 |  |

| HB Fund Expense | 1,350 | --- | 1,350 |  |
| --- | --- | --- | --- | --- |
| CSRS Refund | -335 | --- | -335 |  |
| Supp. Payment |     -132 |     --- | -132 |  |
| Net Income/Loss | -$1,078 |   $846 | -$1,924 |  |
| (Data in Millions) | Numbers may not add due to rounding |  |  |  |

## Income Statement – Qtr 2 YTD, FY 2007

|  | Actual | SPLY | VAR | %SPLY |
| --- | --- | --- | --- | --- |
| Volume | 110,114 | 109,115 | 999 | 0.9% |
| Revenue | $38,069 | $37,177 | $892 | 2.4% |
| Expense |   37,064 |   35,602 | 1,462 | 4.1% |
| Income from Operations | $1,005 | $1,574 | -$569 |  |

| Prior Year Escrow | 2,958 | --- | 2,958 |  |
| --- | --- | --- | --- | --- |
| HB Fund Expense | 2,700 | --- | 2,700 |  |
| CSRS Refund | -715 | --- | -715 |  |
| Supp. Payment |     -129 |        --- | -129 |  |
| Net Income/Loss | -$3,809 | $1,574 | -$5,383 |  |
| (Data in Millions) | Numbers may not add due to rounding |  |  |  |

## Volume Performance – Qtr 2 YTD, FY 2007

|  | Volume
YTD | SPLY Change YTD | Qtr 2SPLYChange | Qtr 1SPLYChange |
| --- | --- | --- | --- | --- |
| First-Class | 49.8B | -1.3% | -2.5% | -0.1% |
| Standard | 53.7B | +3.2% | +1.2% | +4.9% |
| Periodicals |   4.4B | -3.7% | -2.2% | -5.3% |
| Express |   28M | -1.6% | -0.2% | -3.1% |
| Priority | 481M | -2.2% | -5.3% | +0.7% |
| Package Svc. | 621M | -0.7% | -2.7% | +1.1% |
| International | 452M | +6.0% | +9.6% | +3.0% |
| Total | 110.1B | +0.9% | -0.6% | +2.3% |

## First-Class Mail Volume

**FY 2005**

**FY 2006**

**FY 2007**

## Standard Mail Volume

**FY 2005**

**FY 2006**

**FY 2007**

## Periodicals Volume

**FY 2005**

**FY 2006**

**FY 2007**

## Revenue Variance to SPLY

|  |  |  | YTD |
| --- | --- | --- | --- |
|  | Qtr 1 | Qtr 2 | Qtr 2 |
| Commercial | $800 | -$5 | $795 |
| Retail | 374 | -231 | 143 |
| Other |        17 |    -62 |     -45 |
| Total Revenue Var. | $1,191 | -$298 | $893 |
| ($ in Millions) |  |  |  |

## Total Factor Productivity

## Variance to Workhour Savings – YTD March

_**Variance**_

_** **__**Plan**_

_**Actual**_

**   ****Salaries & Benefits Savings**

**   ****Workhour Savings**

**    ****$328**

**9.1**

**   ****$533**

**14.8**

**$205**

**5.7**

**   ****Less Labor Mix Savings**

_**  **__**-105**_

**(Data in Millions)**

**   ****Total Salaries & Benefits Variance to Plan**

**$100**

***National Day of Mourning = 3.4M Workhours ($122M)**

## Expense Drivers to SPLY Variance

| Salaries & Benefits: | Qtr 2 YTD |
| --- | --- |
| General Increases |  +$823 |
| Mar / Sep 2006 COLA
Workhour & Rate Mix Savings
Other
Total Salaries & Benefits
Transportation:
Highway Transportation
Air Transportation
Other |    +488  
    - 433
                     +31
 +$909

    +$73
   +191
        +69 |
| Total Transportation |  +$333 |
|  |        ($ in Millions) |

## Statements of Cash Flow

| Beginning of Year | Six Months Ended March 31, 2007 | Six Months Ended March 31, 2006 |
| --- | --- | --- |
|     Cash |    $997 |    $930 |
| Cash Flow from Operations |   3,264 |   3,071 |
|     Capital Cash Outlays |      (941) |   (1,086) |
|     Free Cash Flow |   2,323 |   1,985 |
|     Net Cash used in       Financing Activity |    (2,098) |         (8) |
|     Net Change in Cash |      225 |   1,977 |
| Cash at End of Period | $1,222 | $2,907 |
| ($ in Millions) |  |  |

## FY 2007 Debt through Qtr 2 YTD

| Beginning Debt | $2.1 |
| --- | --- |
| Payment of Debt | -$2.1 |
| Ending Debt | $0.0 |
| ($ Billions) |  |

## Risks to Outlook for Quarters 3 and 4

**Economy**
**Potential Impact from May Rate Increase**
**Labor Agreements / Workhour Reductions**
**Workers Compensation**

## Outlook for Quarters 3 and 4

_**Risk Level   **_

_**Plan    **_

**Revenue**

**Medium to High **

** ****$37.3B  **

**Expense***

** ****Medium**

**   **_**  **_

**Net Loss**

**Medium to High**

** ****-$1.8B  **

**Volume**

**Medium to High**

** ****-1.7% to SPLY **

** **_**$39.1B**_** **

***Includes Legislative Changes**

## Actions to Manage Risks

**Workhour Controls**
**Reduce Overtime**
**Full Use of Negotiated Labor Flexibility**
**Tight Cost Control**

## Summary of Costs From New Law – FY 2008

**Eliminate CSRS Contribution****	****	****	**** $1.5**
**Eliminate Escrow Payment****	****	****	****	****   3.6**
**Scheduled Payment to RHBF****	****	****	****  (5.6)**
**Removal of Interest Income on Escrow****	****  (0.3)**
**Additional SOX and Administrative****	****	****  **_**(0.2)**_
**Direct Impact of Reform on Net Income****	****$(1.0)****	**

## Mailers’ Technical Advisory Committee Meeting

May 16, 2007

**Chief Financial Officer &**
**Executive Vice President**

- FINANCIAL UPDATE

**Mailers’ Technical Advisory Committee Meeting**
**May 16, 2007**

- MTAC