October 23, 2014

Value of the Area Focus Groups:  Offers Immediate Issue Resolution  Provides Opportunity for Crucial Feedback / Suggestions / Ideas  Builds Critical Relationships at All Levels of the Organization  Creates Forum to Communicate Operational Changes 2 Eastern Area Focus Group

02 Alignment within a $800B Industry 3

Pricing Update  USPS Governors have decided not to seek a price change for mail and shipping products and services in January  Current pricing of postal products and services will remain in effect through the holiday season and early part of 2015  Board will continue to evaluate pricing strategies and communicate any potential price change filings in early 2015  As always, the Postal Service will provide customers advance notice of any price changes USPS to Maintain Current Product and Services Prices 4

 USPS Challenge  2015 Financial Outlook  Network Rationalization Phase 2  Growth Opportunities  Industry Collaboration Agenda  Fall Mailing Season Readiness 5

6 Volume Price Labor Costs Universal Service Obligation  Limited pricing flexibility Postal network driven by:  Delivery points  Retail locations  Sortation facilities  Six-day delivery  ~80% of total costs  COLA increases  Benefits: pensions, retiree health, health insurance  Limited flexibility  Retiree prefunding obligation, rising workers’ compensation costs These trends will continue to put pressure on USPS ability to provide affordable universal service Decliningsteadily  Transactional volume declining due to e-diversion  Advertising mail is subject to more substitution options  Mail volume highly sensitive to economic changes  Mail mix changes – lost profit contributions Fixed cost base Rising but capped capped Rising cost per hour Business Imperative for Change

® Volume Trend FY2013 vs. FY2014 Preliminary and Confidential Pieces - Billions -1.5% 0.0% -3.9% +0.6% -4.6% % +9.3% -7.4% -5.2% 7

® Revenue Trend FY2013 vs. FY2014 Preliminary and Confidential $ Billions +2.9% $66.0$ % +4.1% +10.8% -1.2% -2.9% +3.3% +12.1% +2.9% +0.0% -2.3% -1.6% $69.4 8

Continuous Efficiency Improvements Have Helped Mitigate Effects of Business Threats Continuous Efficiency Improvements Have Helped Mitigate Effects of Business Threats 800 Career Employees – Reduced by 208K since 2006, without layoffs Postal Service is More Efficient Than Ever $16 Billion of Annualized Savings in the past eight fiscal years with workhours reduced by 24% 9

A Deep Financial Hole July 31, 2014 A Deep Financial Hole July 31, 2014 Preliminary and Confidential 10

Eastern Area Focus Group

12 Projected Mail Volumes by Major Classes of Mail

FY2014 Controllable Expenses GI/COLA/ Step Increase FERS Increase Network Phase 2 Costs RHB/ Health Benefit Increase Rate Mix Savings Transp. Initiatives Other $66.8 ($ in Billions) Non- Personnel Inflation PostPlan Rate Savings Workhour Savings (including Phase 2) Transp. Increase FY2015 Controllable Expenses $1.4 $0.4 $0.3 $69.2 $0.3 $0.2 $0.1 ($0.2) ($0.1) Projects / R&A Rent/Fuel/ Maintenance Increase Total Cost Increases +$3.1B Total Savings ($0.7B) Controllable Expense Reconciliation Projected FY2015 Upward Cost Pressure Preliminary and Confidential $2.1B 13

FY 2015 Expenses Risks/Uncertainty FY 2015 Expenses Risks/Uncertainty  Legislation delaying consolidations/other initiatives  Increased inflation  Adverse change in the economy  Increase in the rate of electronic diversion  Exigent appeal  Fall volume projections 14

Eastern Area Focus Group 10/23/14 15

16  Financial losses of $26 Billion over last 3 years  Continued decline of First-Class Mail volume  Increasing wage inflation and operating costs  Debt pressures  Uncertainty regarding legislative reform  Review of postal prices in courts  Needed capital investments to acquire package sorting equipment and replace aging delivery vehicle fleet Phase 2 Network Rationalization Business Imperative Phase 2 Network Rationalization Business Imperative

Total by Facility Type Annexes 2Customer Service Facilities 16DDC's 1P&DC/P&DF's 63Total 82 USPS Modeled Processing Network Phase II 17

18  Early Warning System well established  Mail move plan updated and posted on RIBBS  Continued communication with the mailing industry  Site Intervention based on Early Warning System  Feedback system in place to address customer issues: CustomerFirst! System BSN eService Tools & Processes in place to ensure High Level of Service Performance Flawless Execution Recovery “Tiger Team” Early Warning System High Levels of Service Performance Expected

19  Enables mailers to plan consolidation implementation progress  File provides targeted mail move consolidation site information, type, and date Mail Move Plan is updated and posted on RIBBS Mail Move Plan

20 Complement Advantages of a Transformed Infrastructure Phase ll Benefits Advantages of a Transformed Infrastructure Phase ll Benefits  Reduce Excess Capacity  More Efficient Transportation Network  Fully Utilized Workforce  Up to $750 Million Cost Reduction  Reduced Equipment  Reduced Footprint  Revised Entry Times  Preserves Approx. 66% of Overnight Delivery Volume

21 We are doing our utmost to maintain the long-term affordability of mail and high level of service Long-term Affordability & High Levels of Service We are working to make this transition as seamless as possible for our business customers as well as our residential customers Seamless Transition We value the mail and our employees and will provide responsible solutions throughout the transition Responsible Solutions Commitment

® 22 Eastern Area Focus Group

® Fall Mailing Season Readiness 23  Enhanced Industry communications  After Action Reviews  Implemented Lean Mail Processing program  Equipment Moves  Finalized equipment run plans/staffing requirements  Supplemental workforce increases Key Actions Oversight  Established 24/7 HQ Command Center  Watch List developed from last years “vital few”  Early Warning System in place  Expanded use of robust diagnostic tools

24 Mail Transport Equipment (MTE)  MTEOR Fully Deployed  Mailers – served by MTESC and Plants  All Postal Plants  Industry Communication  Fall Mailing Season Webinar Held on August 14th  Follow-up Webinar Scheduled for Oct 28th  New Deliveries Began 10/1/14  MTESC’s Operating Weekend Hours to Meet Increased Demands

® Our Commitment 25  Sufficient capacity in our networks  Peak days/weeks identified and resource plans in place  Comprehensive contingency planning (weather impacts)  Industry partnership / communication

®  Competitive  Functional  Actionable  Creative  Personally Relevant Eastern Area Focus Group

27 Connect people to information that matters using mobile technology and innovations Develop new targeting tools and services to support USPS becoming world-class direct mailer. Test, learn, expand Develop & support new technologies, uses and sources of value for mail; create promotions to drive uptake of value-adding innovations Enable USPS to be premier direct mailer Create products and tools that better serve our customers USPS Mail Strategy

28 an Optimum Connection Provides a jumping off point  Mobile coupon  Mobile-optimized web site  Responsive web site Mobile Technology

29 o Relevance o Effectiveness o Convenience o Responsiveness o Engagement  Smartphones and tablets interact with the printed page  The Direct Mailpiece or Catalog promotes mobile commerce  Direct Mail and Catalog integration with technology increases: Mobile BarcodeNFCImage RecognitionAugmented Reality Mobile Technology

Mobile Commerce and Personalization Promotion  Promotions continue to drive change in mailing industry  Exploring new ways to evolve promotions o Longer promotion periods o Flexible promotional periods -Multiple years *Proposed Link to calendar: Promotions

31 Commitment

TECHNOLOGY “Leveraging to drive BUSINESS VALUE” INNOVATION and Eastern Area Focus Group

33 100% Visibility

02 Unique barcodes on letters, flats, packages, trays and containers Access to analytical capabilities for forecasting and predictive workloads Real-time Data & Intelligence % Visibility

HOW? Full Service Intelligent Mail Strategies % Visibility

02 Visibility & Reliability Real-time Alerts & Notifications Measure Logistics Provider Performance Reduce downstream surprises Lower Cost Access to lowest possible rates Access to mailing incentives Reduce USPS costs, protect price for mailers Ease of Use Mail Anywhere - One Permit Across All Mailing Locations Eligibility for eInduction & Seamless Acceptance Real-time logistics planning 36 Benefits

Cost Effective, Consistent Reliable Service Why? 37

Service Performance Diagnostics From Reactive to Proactive Service Measurement Meeting Service Expectation Predictability Visibility DRIVING EFFICIENCY THROUGH MEASUREMENT & DIAGNOSTICS 38

39 Standard SCF Service Performance SCF LettersSPLY Control Limits Target SCF FlatsSPLY Control Limits Target

40 Standard NDC Service Performance NDC LettersSPLY Control Limits Target NDC FlatsSPLY Control Limits Target

41

42 Enable American commerce with a world-class shipping platform Develop direct induction services for shippers anywhere in the network Make returns simple, flexible and cost-predictable Develop new products that enable preferences, options and control Improve shipper and receiver perception of USPS products and services Improve reliability perception Dominate last mile Market-leading returns solutions Market-leading returns solutions Options to control delivery Dominate last mile Market-leading returns solutions Market-leading returns solutions Options to control delivery Package Growth Opportunity

Building a World Class Package Platform 43

Sunday Delivery Leveraging Sunday delivery to grow our overall package business Parcel Select Next-Day Next-day delivery for SCF-dropped packages (last mile and a half) MetroPost Same-day, competitive-priced delivery Collaborating with larger retailers with NYC introduction Growth Opportunity - Customized Shipping 44 Customized Products to Meet the Needs Of Large eCommerce Shippers

C007 Delivery Sortation System PASSReal-Time Scanners Mobile Delivery Device (Replaces Real-Time Scanners) 03 Ring Scanners New Parcel Sorters New Tracking System Future Vehicles Next Generation Equipment 45

46 Growing Consumer Expectations Consumers’ busy lifestyles demand more delivery convenience New businesses take notice of these demands and offer more expedient deliveries Existing players improve their offerings to meet demand These changes set new consumer expectations Today’s Expectations

USPS Innovation Opportunities 47 Physical Network First Mile Last Mile DigitalDigital  Leverage market- leading physical assets  Incorporate evolving logistics solutions  Develop a structure that fosters agility and innovation  Boost the demand for mail and packages  Expand and simplify induction points  Integrate emerging digital, big data, and consumer trends to grow  Expand delivery solutions  Capitalize on the expansion of E- commerce and technology  Optimize route flexibility and productivity  Leverage USPS’s brand, trust, and reputation to drive profit

48 Eastern Area Focus Group

49 Success Requires Collective Effort  Committed to Collaboration/Communication  Exchange Ideas & Preempt Issues PCC Week 2015 – September NPF Anaheim, CA May Area Mailing Industry Focus Groups – Calendar by Area Council  Drive Innovation and Adopt Technology  MTAC  Association Meetings  NPF  Trade shows and other events

Going Forward  Optimize the Value of Infrastructure  Innovate to Grow Revenue & Retain Customers  Deliver the Value Proposition  Positive Belief in the Future 50

51 Eastern Area Focus Group