1. Mailing Industry View and Congressional Update Northeast Area Mailing Industry Focus Group Meeting Joe Schick Vice President of Postal Affairs

2. | 2 2015 Issues CPI Increase FSS Price Structure Network Rationalization Phase II New 24 Hour Operations Clock Machinable Mailpiece Characteristics Exigent Rollback USPS Labor Negotiations

3. | 3 CPI Increase/Price Change 1.966% average Industry struggling with analysis (apples to apples comparisons) – Complexity for flats – FSS pricing – Standard Mail dropship discounts First Class Presort – greater than CPI – No change to First Class Single Piece (first ounce)

4. | 4 CPI Increase/Price Change Periodicals – Outside County = 1.34% (PRC found USPS error) – Substantial reductions to pound rates – Substantial increases to bundle and container rates – Wide variance of impact (decreases – much greater than CPI increases) Standard Mail – Letters = greater than CPI – Flats = CPI + 1.05% at a minimum – Enhanced Carrier Route = 1.4% (average) – Parcels = +9%

5. | 5 CPI Increase/Price Change Bound Printed Matter – Flats = <1% increase – Parcels = +2.5% increase – FSS pricing for flats Nonprofit Mail – Standard Mail letter increase > regular rates 5-digit entered at DSCF Auto dropship < regular rates – Periodical increases above CPI

6. | 6 FSS Pricing Required prep for all mail destinating in FSS zones Eliminates Carrier Route in FSS zones – slightly higher than current carrier route price High Density and High Density+ not required Facility pallets can be entered at DFSS facility Difficult to determine true impact

7. | 7 Network Rationalization Phase II Began in January 82 facilities Impact to First Class Mail? Will Phase I success be replicated? Concerns with distance from processing to delivery units? Rollout will be monitored closely

8. | 8 24:00 06:00 12:00 18:00 08:00 Outgoing Operations (5:00 PM – 12:30 AM) Continuous DPS/Secondary Operations (12:00 PM – 6:00 AM) Incoming Primary Operations (8:00 AM – 12:00 PM) BMEU (8:00 AM – 7:00 PM) Continuous Remittance/ Caller Service Processing 0800-0600 24-Hour Plant Operations January 2015

9. | 9 Machinable Mailpiece USPS initiates re-examination of machinable mailpiece characteristics – initially flats – What is reason? – Where are results from previous changes/modifications to requirements? – What is the expectation for results? (more restrictive or flexible) MTAC Work Groups approved – all products (letters, flats & parcels) – Parcels will be first

10. | 10 Exigent Rollback Will exigent increase “expire”? – Expected by July/August – Reduce prices by 4.3% Still waiting for court decision on appeal by USPS and mailing industry – Had been expected before the end of 2014 – If court agrees with PRC decision, will it impact CPI price change implementation date? (combine CPI and exigent rollback)

11. | 11 Legislative Update New Chairmen in key committees – Senator Ron Johnson (WI) – Committee on Homeland Security and Government Affairs – Rep. Jason Chaffetz (UT) – Committee on Oversight and Government Reform Will we see legislation in 2015 or 2016? – USPS improved finances – Positioning for Presidential election has already begun – Congressional priority list – where is USPS reform? – Have the issues changed? (still contentious)

12. | 12 USPS Labor Negotiations Improved finances drive demands – Misleading (6% price increase in 2014) APWU position – Coalition – New president (hard line) NALC position – Delivering more diverse products – Time on the street (early morning and after 5pm) – 3 rd bundle issue (EDDM contributing) Results will impact cost and prices

13. | 13 Questions?