FY 2007 Integrated Financial Plan

1. FY 2007Integrated Financial Plan Mailers’ Technical Advisory Committee Meeting November 1, 2006 H. Glen Walker Chief Financial Officer & Executive Vice President

2. Operating Plan Capital Plan Financing Plan

3. FY 2007 Assumptions • Economy • Inflation Rate = 1.9% • ECI Forecast (July) = 3.0% • Moderate Job Growth = 1.4% • Sluggish Retail Sales = 1.4% • Continued Competitive Diversion • No Legislative Changes Are Included • 8.5 Percent Postage Rate Increase Will Be Implemented By May 2007

4. FY 2007 IFP Summary • Volume Declines -0.5% Vs. FY 2006 • Revenue Increases 3.2% Vs. FY 2006 • Cost Reductions Of $1.1 Billion Are Included • $3.3 Billion Escrow Requirement • Eighth Consecutive Year Of TFP Growth • Labor Negotiations Will Result In ECI−1 • Work Hours Will Go Down By 40 Million Hours

5. FY 2006 Annual Audit Underway • Preliminary Results Indicate • Flat Volumes • Light Revenues • Continued Cost Pressures (i.e. fuel) • Audit to be Finalized Mid-November

6. FY2006 Forecast FY2007 Plan % Chg 213.5B 212.3B −0.5% Volume (Pieces) Revenue $72.9B $75.3B 3.2% Expense 71.7B 73.6B 2.6% Net Income $1.2B $1.7B Escrow Restricted Cash $3.0B $3.3B Deficiency After Escrow −$1.8B −$1.6B 2007 Income Statement

7. Down 2.7% Other Other Up 1.9% Down 2.8% Volume Change 213B 212B Standard Standard First- Class First- Class Total Volume Down by 1.1B Pieces

8. First-Class Mail Volume Change Forecast Pieces in Billions

9. Standard Mail Volume Change Forecast Pieces in Billions

10. Delivery Point Growth FY 2000 – 2007 FY Est. Plan Data in Millions

11. Growth Before Cost Reductions +4.2% Cost Reductions $1.9B Net Increase +2.6% Expense Growth – FY 2007 $3.0B $1.1B

12. Supplies, Materials, etc. +3.7% Transportation +3.4% Personnel Compensation +2.4% Total Growth +2.6% Expense Growth – FY 2007 $1.9B

13. 2005 2006 2007 Workhour Reductions Est. Plan Cumulative Reduction 713M Workhours

14. Long Term Trends – Total Factor Productivity Cumulative 1972 – 2006 Average Annual Growth 1972 – 1999 = 0.3% 2000– 2006 = 1.5% FY Percent Growth

15. Operating Plan Capital Plan Financing Plan

16. Capital Commitments FY Est. Plan ($ Billions)

17. Capital Commitments – FY 2007 Components $3.5B Total Commitments

18. Operating Plan Capital Plan Financing Plan

19. Estimate FY 2006 Plan FY 2007 Beginning Year: Cash $ 0.9 $ 1.3 Escrow Balance − 3.0 Cash Flow from Operations $ 3.9 $ 4.0 + Capital Cash Outlays −2.4 −2.2 = Free Cash Flow $ 1.5 $ 1.8 = Change In Cash Before Escrow + Cash From Financing 1.9 $ 3.4 1.2 $ 3.0 End of Year Cash $ 1.3 $ 1.0 Restricted Cash – Escrow 3.0 6.3 Debt Outstanding at Year End $ 1.9 $ 3.1 FY 2007 – Financing Plan ($ Billions)

20. $0.5After Escrow $6.3 $3.0 Deficit / Retained Earnings $5.2 $3.5 -$1.1 After Escrow ($ Billions)

21. FY 2007 Risks and Uncertainties • Economy • Inflation • Aggressive Work Hour Reductions • Labor Negotiations • Postal Legislation • Rate Recommendation From PRC and Implementation

22. FY 2007Integrated Financial Plan Mailers’ Technical Advisory Committee Meeting November 1, 2006 H. Glen Walker Chief Financial Officer & Executive Vice President