® Flats Sequencing System (FSS) November 20, 2008 Rosa Fulton Phil Fabrizio

Agenda  FSS Pre-production / Production  Flat Volume Update  Phase 1 Capacity Review ● Forecasting for Change  Flats Track – National Postal Forum 2009

Pre-production & Production Program Update Dulles P &DC

Dulles FSS Status Preprod FSS Install & Operational Complete 1 st Production FSS Install & Ramp-up Complete Production Pre-Test In-progress Acceptance Test Nov 24 th 2 nd Production FSS Installation In-progress 3 rd Production FSS Installation Nov 2008

Dulles Operational Ramp-up  Production FSS Seven Sort Schemes ●10 Delivery Units ●19 Zones Sort SchemeZones Reston Annex20191, Fairfax Main22030, 22035, Sterling Main Reston Main 20164, , McLean22101, Burke Culpeper 22009, Alexandria – Belle View Alexandria – Engleside Falls Church22040, 22043,  Preproduction FSS Four Sort Schemes ●3 Delivery Units ●4 Zones Sort SchemeZones Arlington - South22204 Arlington – North22207 Manassas20109 Manassas20110

FY 2008 SPLY Comparison RPW

FY 2008 SPLY Comparison FY 2008 YTD Total Flat Volume Decline -11.1% FY 2008 YTD Total Flat Volume Decline -11.1% RPW Decline -5.8 Billion Flats Decline -5.8 Billion Flats

FY 2008 SPLY Comparison RPW Lowest Volume Since 1997

Flat Volume 2006 – 2008 Comparison Billion52.4 Billion46.6 Billion Flat Volume Decline -1.4 billion Flat Volume Decline -5.8 billion -2.6%-11.1% Zones Required to Support 100 FSS 1, Original FSS Capacity Model

Capacity Review  Baseline Model  Recast Model with 2007, then 2008 Data  Candidate Zone Criteria for 32 FSS Sites  8,943 Zones Expanded to 12,460 Zones  Sweet Spot Focus on 2,484 Zones  FSS Scheduler Activities for 100 FSS  Capacity Scenario Based on 2008 Actual Data

What If - Sensitivity Analysis  Applied Volume Loss Sensitivities ● Possible Incremental Declines  Scenarios Performed ● Over-deployment Risks Identified ● Implementation Scheduling Impacts  Modeled Loss Scenarios for all 32 Sites  Identified Low, Medium and High Risk Sites  Identified Reaction Timelines

Next Steps  Due Diligence Trigger Points  Deeper Dive Highest Risks  Developed an Early Warning System  Identified Alternate (Phase 1A – 2) Sites  Last Resort - Redeploy, if/when Necessary

National Postal Forum 2009 Planning National Postal Forum ® ®

Flats Track Proposal – NPF 2009  Combine Periodical Track, Printer Track and Flats Symposium into One Flats Track  Target Workshops to Support all Flat Mailers  Total of 12 Workshops  Certificate Program ● Participants Required to Attend a Total of 4 Workshops and the Tuesday General Session to Receive Certificate

NPF Flats Track Workshop # Workshop Title USPS Flats Strategy Addressing Standards for Flats (Includes IMB) Future Prep & Entry for Flats Co-mail Co-Pallet Co-Binding The Skinny on Slim Jims Future of Catalogs Target Audience Periodical Mailers Catalog Mailers Printers Proposed Workshops Workshop # Workshop Title Building Your Periodical Business Optimizing Postage Savings, Small Volume Periodicals Periodical Pricing Managing Postal Budget & Cost Reduction Opportunities Nuts & Bolts of Periodicals Printers Expand into Mailing 10 Steps to Success Target Audience Periodical Mailers Printers

Flats Track Proposal – NPF 2009  Finalize Workshop Descriptions  Finalize Speakers  Finalize Format of Each Workshop Next Steps

Conclusion