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Transcript of Financial Update H. Glen Walker Chief Financial Officer & Executive Vice President National Postal...
Financial Update
H. Glen WalkerChief Financial Officer &Executive Vice President
National Postal Policy CouncilMay 13, 2008
Service
Financial Results
Outlook
Agenda
Service
Financial Update
National Composite PerformanceImprovement Compared to Last Year
Source: IBM Global Business Services
Service
Standard
(Last Year)
PQ 2, FY 07
(Current)
PQ 2, FY 08 Improvement
Overnight 95 96 + 1
Two-Day 91 94 + 3
Three-Day 88 92 + 4
Quarterly Service Performance PQ 2, FY 2008
EXFC Quarter 2 FY 2008
Financial Update
District Area FY 07 FY 08Dakotas Western 97 98Big Sky Western 97 98Honolulu Pacific 97 98Suncoast Southeast 95
98Nevada-Sierra Western 96 98Colorado/Wyoming Western 96
98
Top 6 Districts Overnight Composite
Source: IBM Global Business Services Quarterly Service Performance PQ 2, FY 2008
EXFC Quarter 2 FY 2008
Financial Update
Top 9 Districts 2-Day Composite
Source: IBM Global Business Services
District Area FY 07 FY 08Alaska Western 97 97Portland Western 94 96 Seattle Western 94 96Suncoast Southeast 93 96South Florida Southeast 93 96Santa Ana Pacific 92 96Los Angeles Pacific 94 96 Northern Virginia Capital Metro 92 96San Diego Pacific 95 96
Quarterly Service Performance PQ 2, FY 2008
EXFC Quarter 2 FY 2008
Financial Update
Top 4 Districts 3-Day Composite
District Area FY 07 FY08
Capital Capital Metro 92 94Baltimore Capital Metro 91 94Northern Virginia Capital Metro 91 94Central New Jersey New York Metro 89 94
EXFC Quarter 2 FY 2008
Source: IBM Global Business Services Quarterly Service Performance PQ 2, FY 2008
Financial Update
National Overall Performance - %E/VG/G
Percent
Ratings
(Last Year)
PQ 2, FY 07
(Current)
PQ 2, FY 08 Improvement
Overall Performance
92 92 Maintain
Customer Satisfaction QTR 2 FY 2008
Source: IBM Global Business Services Quarterly Service Performance PQ 2, FY 2008
Financial Update
Most Trusted Government AgencyUSPS Ranked #1 Four Times in a Row
SOURCES: Privacy Trust Studies of the United States Government © by the Ponemon Institute (2004, 2006, 2007, and 2008)
2007
USPS1
RANK
83
2007
USPS1
RANK
83
2004
USPS1
RANK
78
2004
USPS1
RANK
78
2006
USPS1
RANK
82
2006
USPS1
RANK
82
2008
USPS1
RANK
86
2008
USPS1
RANK
86
Consumer Trust QTR 2 FY 2008
Financial Update
Overnight Service Performance96 percent
Two-day Service Performance94 percent
Three-day Service Performance92 percent
Residential Customer Satisfaction92 percent Excellent/Very Good/Good
Postal Quarter 2, FY 2008
Quarterly Service Performance PQ 2, FY 2008
Summary of Performance
Financial Results
Financial Update
Volumes down on last year for all mail classes– Economy
– Last price increase under old regulatory system
Rising fuel costs
Financial Performance Overview
Financial Update
Intense Focus on Cost Reductions
– Work Hours and Rates
– Transportation
– Headquarters
– Real Estate
Our Reaction To This Environment
Financial Update
Growth Initiatives
– Express, Priority, Ground Packages
– Returns
– Parcel Select
– Mailing Services• Business Development Teams
• Managed Accounts
Our Reaction To This Environment
Financial UpdateIncome Statement
Qtr II, FY 2008
Numbers may not add due to rounding(Data in Millions)
0.3%52 19,578 19,630Expense
3.1%$584$18,339$18,923Revenue
-3.3%-1,72653,02851,302Volume
%SPLYVARSPLYActual
Net Income/Loss -$707 -$1,239 $532
Financial UpdateIncome Statement
Qtr II YTD, FY 2008Income Statement
Qtr II YTD, FY 2008
Numbers may not add due to rounding(Data in Millions)
0.0% 55 39,280 39,335Expense
3.3%$1,272$38,028$39,300Revenue
-3.1%-3,426110,131106,705Volume
%SPLYVARSPLYActual
Operating Income/Loss -$35 -$1,252 $1,217
Net Income/Loss -$4,210 $4,175Prior-Year Escrow $0 $2,958 -$2,958
-$35
Financial UpdateRevenue Variance To SPLY Revenue Variance To SPLY
($ in Millions)
Commercial $328
Retail 309
Total Revenue Variance $584
Other -53
$799
509
$1,272
-36
Qtr II
Qtr II YTD
Financial UpdateQtr II 2008 Volume
Volume % SPLY First-Class 23.7B -3.1%Standard 24.5B -3.0%Periodicals 2.2B -4.3%
Priority 220M -4.2%Package Svc 279M -4.0%Total All Mail 51.3B -3.3%
Express 12M -14.3%
Financial UpdateQtr II YTD FY 2008 Volume
Volume % SPLY First-Class 48.0B -3.5%Standard 52.2B -2.8%Periodicals 4.4B -1.6%
Priority 461.0M -4.6%Package Svc 597.0M -3.7%Total All Mail 106.7B -3.1%
Express 4.0M -12.6%
Financial Update
121
409
293223 208
162 172126
176 179
275343
547
670
745
527 562649
609
708
867
671 580 497
423
1,088
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08
Forever Stamps Denominated Stamps
$ Millions
Total Stamp Sales
Financial Update
2.7% 2.4%
-1.5%
2.3% 2.3%
-0.6%-1.3%
-2.1%-3.0%-3.3%
-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
8 Quarter Moving Average Growth Rates% SPLY
FY 2005 FY 2006 FY 2007FY 2004 FY 2008
Total Mail VolumeTotal Mail Volume
Financial Update
0.3%
-4.0%
1.2%-0.1%
-2.5%-1.3%
-2.6%-3.9%
-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
% SPLY 8 Quarter Moving Average Growth Rates
FY 2005 FY 2006 FY 2007FY 2004 FY 2008
First-Class Mail Volume
Financial Update
-0.7%
9.3%
4.9%
-1.4%-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
% SPLY 8 Quarter Moving Average Growth Rates
FY 2005 FY 2006 FY 2007FY 2004 FY 2008
Standard Mail VolumeStandard Mail Volume
Financial Update
-0.3%
2.5%
0.7%
-5.9%-4.2%-5.3%
-2.8%
1.4%
10.3%
0.7%
7.5%
2.6%
-4.9%
-2.7%
3.2%
6.1%
4.7%
-4.9%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
% SPLY 8 Quarter Moving Average Growth Rates
FY 2005 FY 2006 FY 2007FY 2004 FY 2008
Priority Mail VolumePriority Mail Volume
Financial Update
0.9%
-5.3%
-2.6%-4.3%
-3.0%
-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
% SPLY 8 Quarter Moving Average Growth Rates
FY 2005 FY 2006 FY 2007FY 2004 FY 2008
Periodicals Mail VolumePeriodicals Mail Volume
Financial Update
Letters-2.9%
Flats-15.4%
Parcels-5.1%
Growth from SPLY
First Class Mail Volume Q2-YTD Shape
First Class Mail Volume Q2-YTD Shape
Financial Update
Letters3.7%
Flats-13.2%
Growth from SPLY
Standard Mail Volume Q2-YTD ShapeStandard Mail Volume Q2-YTD Shape
Financial UpdateExpense Variance to SPLY
($ in Millions) Qtr II
Total Expense VarianceAll Other
Compensation & BenefitsTransportation
$52
21
-$168 175
YTD
$55
122
-$435 173
Depreciation & Amortization Vehicle Maintenance Service 19 65
47 130
Qtr II
Outlook
Financial Update
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 7th year out of the last 50 years.
Fuel prices remain unpredictable.
Challenges – 2nd Half of Fiscal Year
Financial Update
Intense Focus on Cost Reductions Optimize All Growth Opportunities
Requires us to hope for the best but plan for the worst:
Challenges – 2nd Half of Fiscal Year
Financial Update
H. Glen WalkerChief Financial Officer &Executive Vice President
National Postal Policy CouncilMay 13, 2008