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

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

3. Pre-production & Production Program Update Dulles P &DC

4. 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

5. Dulles Operational Ramp-up  Production FSS Seven Sort Schemes ●10 Delivery Units ●19 Zones Sort SchemeZones Reston Annex20191, 20194 Fairfax Main22030, 22035, 22038 Sterling Main Reston Main 20164, 20167 20190, 20195 McLean22101, 22109 Burke Culpeper 22009, 22015 22701 Alexandria – Belle View Alexandria – Engleside 22307 22309 Falls Church22040, 22043, 22046  Preproduction FSS Four Sort Schemes ●3 Delivery Units ●4 Zones Sort SchemeZones Arlington - South22204 Arlington – North22207 Manassas20109 Manassas20110

6. FY 2008 SPLY Comparison RPW

7. 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

8. FY 2008 SPLY Comparison RPW Lowest Volume Since 1997

9. Flat Volume 2006 – 2008 Comparison 200620072008 53.8 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 1,30018002400+ Original FSS Capacity Model

10. Capacity Review  Baseline Model - 2006  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

11. 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

12. 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

13. National Postal Forum 2009 Planning National Postal Forum ® ®

14. 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

15. NPF 2009 - Flats Track Workshop # 123456 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 # 789101112 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

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

17. Conclusion