1. Pacific Area Focus Group

2. Value of the Area 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 Pacific Area Focus Group

3.  USPS Challenge  Transforming Infrastructure  YTD Service Performance and Visibility  Revenue Generation Initiatives  Major FY 2014 Operational Initiatives  Mail Transport Equipment (MTE) Update  Innovation Platforms  DSCF Load Leveling  24 Hour Clock Project Agenda

4. 4 Volume Price Labor Costs Universal Service Obligation  Capped by inflation  Price elasticity impacted due to growing alternatives 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

5. 800 696 '06 685 '07 663 '08 623 '09 584 '10 557 '11 528 '12 491 13 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] 0 5 10 15 20 25 30 TFP Cumulative Trend 24.2 1972 1980 1990 2000 2013 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. 6 A Deep Financial Hole – September 2013 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.

7. Preliminary as of Mar. 11 Confidential 7 * Before RHB pre-funding and non-cash adjustments to workers’ compensation liabilities. Retail and Delivery days were equal to FY2013. Preliminary Financial Results

8. Preliminary as of Mar. 11 Confidential 8 * Before RHB pre-funding and non-cash adjustments to workers’ compensation liabilities.  Retail and Delivery days were equal to FY2013. Preliminary Financial Results

9. Preliminary as of Mar. 11 Confidential 9 * Excludes RHB pre-funding, non-cash adjustments to workers’ compensation liabilities, and separation incentive costs.  Delivery days were equal to FY2013. Preliminary Operating Expenses

10. ® 10 Total Revenue Total Revenue FY13 Jan YTD vs. FY14 Jan YTD

11. ® 11 Projected Mail Volume Projected Mail Volume By Major Classes of Mail

12. ® 12 USPS Five Year Plan

13. ® 13 Key Legislative Goals  Require USPS Health Care Plan  Resolves RHB Prefunding Issue  Refund FERS Overpayment  Adjust Delivery Frequency (6-Day Packages, 5-Day Mail)  Streamline Governance Model  Authority to Expand Products and Services  Require Defined Contribution System for Future Postal Employees  Instructions to Arbitrator  Reform Workers’ Compensation  Right to Appeal EEOC Class Action Decisions

14. 14 Pacific Area Focus Group

15. 15 Management Actions  Network  350 Processing Facilities Eliminate  320 Processing Facilities Remain  Retail  POST Plan – 50% of Post Offices moved to Part Time  Consolidated 2,413 Delivery Units  Delivery  Eliminated 24,000 Delivery Routes since 2006  60% of New Delivery Centralized Service has remained at predictable levels

16. ® 16 Network Consolidations FY2013  Completed 143 consolidations  657 Mail Moves complete Network Rationalization FY2014  Phase 2 timeline to be determined

17. ® 17 Pacific Area Focus Group

18. USPS Delivery Operations 18

19. Major Optimization Initiative  Units  Delivery Unit Consolidations  Routes  City Route Reductions  Deliveries  Efficient Mode of Delivery 19

20.  Reduced Transportation  Capture Economies of Scale  Clerical Resources  Replacement Carriers  Vehicle Utilization  Reduced Facility Costs  Lease Costs / Custodial Costs Delivery Unit Consolidations - Benefits  Reduced Number of Entry Points for Mailers  2,503 Delivery Unit Consolidations Completed to Date  506 Completed in FY 2013  Scope 20

21. City Delivery Route Reductions 21 100 110 120 130 140 150 160 170 163.4 163.5 161.6 150.9 150.0 143.6 143.0 141.9

22. Delivery Mode Conversions 22 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

23. ® 23 Pacific Area Focus Group

24. ® 24 USPS Retail Network * Includes Village Post Offices

25. ® 25 Access Optimization

26. ® 26 Mobile Point of Sale mPOS Technology  Functionality Enabled:  Product Sales  Prepaid Mail Acceptance  PM Flat Rate  3849 Pickup  A innovative and practical solution to expedite simple transactions in retail lobbies.  Associates are able to engage customers with the mPOS handheld device to take care of customer needs, including check-out, without being tied to the retail window.

27. ®  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

28. Modified window hours Maintain ZIP Code Lobby and P.O. Box access Retain community identity POSt Plan 28

29. 29 Village Post Offices