June 4, 2014

Value of the Area Mailer Industry Focus Groups:  Immediate Issue Resolution  Provides a Forum for Crucial Feedback / Suggestions / Ideas  Builds Critical Relationships at All Levels of the Organization  Forum to Communicate Operational Changes 2 Capital Metro Focus Group

3 USPS Core Objectives Core Business Objectives  Strengthen the business to consumer channel  Improve the customer experience  Compete for the package business  Become a leaner, faster, smarter organization

4 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

' ' ' ' ' ' ' Career Employees – Reduced by 205K since 2006, without layoffs Postal Service is More Efficient Than Ever $16 Billion of Annualized Savings in the past seven fiscal years with workhours reduced by 24% Total Workhours (Millions) Savings (Billions) Annual Growth 1.2% [2000 – 2013] TFP Cumulative Trend Annual Growth 0.3% [1972 – 1999] 5 Continuous Efficiency Improvements Have Helped Mitigate the Impact of Business Threats Continuous Efficiency Improvements Have Helped Mitigate the Impact of Business Threats

6 A Deep Financial Hole Unrestricted Cash Buildings & Equipment, net of depreciation Other assets Total Assets $ 2.3B $ 17.5B $ 1.8B $21.6B Retiree Health Benefits Workers’ Compensation Debt Accrued Compensation, benefits and leave Deferred Revenue* Other Total Liabilities** $16.8B $17.2B $15.0B $ 3.5B $ 3.6B $ 5.4B $61.5B ASSETS LIABILITIES Liabilities exceed assets by approx. $40 billion The USPS has only 35 cents of assets to cover each dollar of its liabilities * Newly available data on forever stamp usage resulted in a $1.3B reduction in Deferred Revenue – Prepaid Postage ** Under multi-employer accounting rules, there are approximately $51B in obligations not shown on the balance sheet.  Significant profits over years and legislation are needed to recover.

* Before RHB pre-funding and non-cash adjustments to workers’ compensation liabilities.  Retail and Delivery days were equal to FY2013. Preliminary and Confidential Preliminary Financial Results April YTD - 7 monthsPrelimFY (Billions) $39.5Revenue$ Expenses* Separation Costs - (0.2) Operating Income (Loss)* 1.2 (3.3) Retiree Health Benefits Pre-Funding (3.3) 0.1 Workers' Comp. Fair Value Adj. (0.1) (0.6) Workers' Comp. Other Non-Cash Adj. (0.5) ($4.0) Net Income (Loss) ($2.7) 79.6B Total Volume 80.1B 7

8 Total Revenue vs Volume: FY14 Q2 YTD vs. SPLY Source: RPW/RVC FY13 Q2 YTD VOLUME First-Class MailStandard MailTotal Shipping & PackageOther (includes Periodicals)International Mail (Million Pieces) -2.6% 82, % +8.8% - 3.8% -1.3% - 6.5% FY13 Q2 YTD REVENUE ($ Rev Billions

® 9 USPS Business Plan

10 Capital Metro Focus Group

11 Management Actions  Network  More than 350 Processing Facilities Eliminated  Reduced over 75 Million Miles  Delivery  Eliminated 24,000 Delivery Routes  Consolidated 2,513 Delivery Units  Retail  POStPlan – 50% of Post Offices Realigned to Match Community Needs  Facilities  Eliminated over 6.7 million Square Feet Service has remained at predictable levels

12 NETWORK CAPACITY Network Rationalization

Plant Consolidations Phase

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USPS Delivery Operations 15

Major Optimization Initiative  Units  Delivery Unit Consolidations  Routes  City Route Reductions  Deliveries  Efficient Mode of Delivery 16

Delivery Mode Conversions 17 CURBLINE DOOR CENTRAL 37.8M40.5M 31% 28% 55.0M 41.0% Door Curbline (61.2K) 490.9K (6%) 47% Centralized 607.6K 59% Current Policy/Strategies are Driving Migration to More Efficient Delivery Mode FY 2013 Growth % Total FY 2013 Growth % Total Total Growth 1.04M - - Fiscal Year 2013

18 Capital Metro Focus Group

19 USPS Retail Network

 Grow Revenue  Reduce the Cost to Serve  Transform Customer Experience in High Traffic Post Offices  Enhance Customer Convenience Through Expanded Retail Partnerships  Preserve Retail Services in Rural America Retail Strategy 20

21 Capital Metro Area Focus Group

22 Facilities Optimization New Jersey Network Distribution Center – 1.4M Sq Ft Ochopee FL Post Office – 62 Sq Ft

23  Generate Revenue and Reduce Expenses by:  Selling owned buildings  Terminating leases  Re-purposing space Facilities Optimization

24 Advantages of a Transformed Infrastructure Fewer Facilities  Denser Bundles/Trays and Pallets  Increased Equipment Utilization  Increased Productivities Maximized Transportation  Better Utilization of Air/Surface Trips  Gain Economies of Scale Right-sized Workforce  Employee Flexibility  Revised Pay Structure Complement

25 Capital Metro Focus Group

26 Imbalance of Mail Delivered by DOW Postal Quarter 1 FY 13 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Disproportionate amount of Standard Mail is scheduled for delivery on Monday resulting in:  Service Variability  Operational Inefficiencies  Increased Cost

27 Current ProposedThursday Friday, Saturday, Monday Friday Saturday, Monday Saturday, Monday, Tuesday Saturday Monday, Tuesday Monday, Tuesday, Wednesday Sunday *The current Critical Entry Time (CET) for Standard mail is 4 pm **For delivery in the continental United States DSCF Standard Mail** Dropped Before 4pm* on DELIVERY DAYS MEETING SERVICE STANDARD Expected Days of Delivery

28 Expected Days of Delivery  Standard mail dropped at a DDU does not change  Standard mail dropped at a NDC does not change  EDDM Retail does not change  Periodical/Newspaper processing does not change  First-Class does not change  Priority does not change

Delivered Volume 29 * 4/19 through 5/23

Service Performance 30 4/12 – 5/17

31 Standard DSCF Flats April 11 – May 23 Friday Start-the-Clock % of Total23.94%53.36%19.60%2.11%0.57%0.20%0.21% Cumulative23.94%77.30%96.91%99.02%99.59%99.79%100.00% Service Variance Day 1 – Saturday 23.94% Day 2 – Monday 53.36% Day 3 – Tuesday 19.60%

DSCF Standard Mail Load Leveling  Results are Promising  Mail Processing working to capacity  Reducing average hours per route  Balanced workload with consistent service performance  Controls and Monitoring  Facility Audits  New data driven diagnostic reports  Address the Vital Few Opportunities  Operational Tiger Teams for site visits and improvement recommendations 32

33 Benefits  Consistent Delivery Times by Day of the Week  Cost Containment – Maintain Affordable Prices  Predictable and Reliable Service  Less Competition in the Mailbox  Benefit to Mailers and Customers  Increase Visibility

34 Capital Metro Focus Group

35 100% Visibility

36 Attributes of 100% Product Visibility Unique barcodes on letters, flats, packages, trays and containers Access to analytical capabilities for forecasting and predictive workloads Real-time Data & Intelligence

37 Predictability Does USPS have the mail? Where is it in the process? When will it be delivered? How did the overall mailing perform? An optimized plan for: Consistent, predictable delivery Avoiding bottle necks Maximize transportation & resource utilization Balance resources & reduce costs

38 Predictable and Measureable Does USPS have the mail? Where is it in the process? When will it be delivered? How did the overall mailing perform? An optimized plan for: Consistent, predictable delivery Avoiding bottle necks Response Rates & ROI Balance resources & reduce costs Business Intelligence Enhances the Performance & Value of Your Mailings HOW? Increasing Visibility Through Technology

39 Next Generation Equipment C007 Nov 2012-Sept 2013 Delivery Sortation System Dec March 2014 Feb-May 2013 PASSReal-Time Scanners Jan–Dec 2014 DeploymentMay-Nov 2014 Deployment Total – 12,500Total – 4,167 Jul 2014-Dec 2014 Mobile Delivery Device (Replaces Real-Time Scanners) Jan 2015 – Aug 2015 Total – 225,000

40 Delivery Management System (DMS)  Evaluates Carrier Route Status to plan and color- coded route status  Estimates Delivery Time for all packages in unit  Currently being tested in limited ZIP Codes

41 Predictable and Measureable Does USPS have the mail? Where is it in the process? When will it be delivered? How did the overall mailing perform? An optimized plan for: Consistent, predictable delivery Avoiding bottle necks Response Rates & ROI Balance resources & reduce costs Business Intelligence Enhances the Performance & Value of Your Mailings HOW? Full Service Intelligent Mail Strategies

42 Full Service – Enables Mailer Visibility Electronic Info for Containers and Trays Received Piece level automation scans Full Service Customers Only All IMb™ Users 133,835, Billion (as of April 1, 2014) Container Scans Tray Scans Entered at USPS: 3,434,000 Enroute Arrive: 497,000 Enroute Depart: 176,000 4,107, ,160,000 Enroute: 88,805,000 Enroute Arrive: 7,757,000 Enroute Depart: 7,598,000 New Visibility for Mailers Data from to

43 Full Service IMb We Are Committed to Full Implementation of IMb ACS Records for all Mail F R E E Check-in at BMEU Electronic Mail Unit Privileges For Full Service Mailing Sites Detach Assessments Based on Trends Move Update WHY? Cost Effective, Consistent Reliable Service 43

44 Capital Metro Focus Group

Continue to Optimize the Value of Infrastructure 45  Enhance the value of Direct Mail and Catalogs  Increase Marketshare of Packages  Innovate across USPS Business Platforms Growth Opportunities

46 Growing Direct Mail – The Challenge Today’s Challenge Keeping mail relevant in an online world

47 Growing Direct Mail Studies have shown that using direct mail and in integrated campaigns creates synergies that boost response over using either medium alone. One study showed that using direct mail with increased response by nearly 30% over direct mail alone. Direct Mail is Relevant! Source: Marketing Sherpa Study

48 Mobile Commerce Mobile Technology Helping Drive Long-Term Value with Direct Mail and Catalogs. Smartphones and tablets interact with the printed page Smartphones and tablets interact with the printed page Direct Mail or Catalog becomes “catalyst” for mobile commerce Direct Mail or Catalog becomes “catalyst” for mobile commerce Direct Mail and Catalog integration with technology increases: Direct Mail and Catalog integration with technology increases: Relevance Relevance Effectiveness Effectiveness Convenience Convenience Responsiveness Responsiveness Engagement Engagement NFC Mobile Barcode Image Recognition Augmented Reality

Integrate Mobile Technology Build upon previous promotions and continue strategy to encourage mailers to integrate direct mail with mobile technology Evolve Mail for New Uses Color promotions Variable data printing Premium advertising Drive Trial Of New Technology Leverage the value of innovative direct mail techniques that are effective but less widely used Promotional Objectives 49

Committed to Mail  We remain committed to growing mail  Will collaborate with the industry to grow and enhance direct mail and catalogs  Embrace technology to attract consumers to new possibilities  Continue to seek promotional ideas from customers 50 The power of mail enhances package delivery & returns.

Growth Opportunity 51

E-Commerce Continues to Grow Rapidly 52

53 Capital Metro Focus Group

54 USPS – Industry Commitment to Communicate  Continue to collaborate through:  MTAC  Assn. Meetings  NPF  Trade shows and other events  Leverage PCC’s & Area Focus Groups to Work With Local Leadership to Resolve Issues Area Mailing Industry Focus Groups – Calendar by Area at

55 Capital Metro Focus Group