USPS Chief Financial Officer & Executive Vice President Joseph Corbett USPS Chief Financial Officer & Executive Vice President September 22, 2016 Financial Update/ Managing the Business

All Mail Volume (in billions) First-Class Mail Volume (in billions) The Great Recession and Electronic Alternatives Severely Impacted Our Business All Mail Volume (in billions) First-Class Mail Volume (in billions) 27% 35% Volume drops result is substantial losses Fixed infrastructure costs/capped pricing Rising legacy costs

Drivers of Incurred, Recurring Losses Executive Summary Despite a demonstrable track record of innovations and improved efficiency, the Postal Service has incurred $57 billion of cumulative losses since the Great Recession (1) (2) (2) Drivers of Incurred, Recurring Losses RHB Pre-funding Declines in First-Class Mail volumes and attendant loss of network density Lack of pricing flexibility In 2009, $4.0 billion of RHB Pre-Funding was deferred and will be re-evaluated in 2017 In September 2011, Congress deferred the 2011 required RHB Pre-Funding payment of $5.5 billion until August 2012; it is included in the ($15.9) 2012 figure 3

TFP increase every year since 2009 8/28/2018 2:47 PM In Reaction to Volume Declines, Management Reduced Operational Costs 2007—2015 $15B in Annual savings TFP increase every year since 2009

A Deep Financial Hole as of September 30, 2015 Total liabilities, including retirement obligations exceed assets by $101 billion. It would take RHB legislative change and decades of annual profits to remedy this level of excess liabilities and unfunded retirement obligations. Our current business model is not sustainable. To remain viable, the Postal Service must continue to reduce costs and gain the necessary freedom to become profitable and improve efficiency This slide includes all assets and liabilities of pension and post-retirement health benefits obligations. Items highlighted in yellow are not shown on our balance sheet under GAAP multi-employer rules and are the OPM’s projected valuation as of September 30, 2015.

Our Business is Delivering Where We Stand in 2016 Our Business is Delivering First-Class Mail 60.4 $27.2 Standard Mail 78.8 $17.2 Shipping & Packages 4.8 $16.9 Other (incl. Periodicals) 6.0 $ 5.0 International 0.9 $ 3.0 Total = 150.9 $69.3 Volume Revenue 2016 Plan (In Billions) Self-funded, no taxes % Rev = Retail % Rev = Commercial International = 0.9B / $2.8B Other incl. Periodicals = 6.3B / $5.1B 2015

1 5 154M 630K 31K 215K 300+ Deliver 47% of world’s mail 2016: While Somewhat Smaller, We Remain a Very Large Entity (Size and Scale are Core to Who We Are) 154M 630K 31K 215K 300+ Deliver 47% of world’s mail Over 150B pieces per year Delivery Points Employees Post Offices Vehicles Processing Centers ,, 1 5 , , , Scanning Events Every Day

FCM Revenue is Declining 2007—2020 FCM Revenue is Declining Packages are Growing While the Postal Service has benefited from its efforts to stabilize Standard Mail volume and increase Packaging and Shipping volume, overall contribution and profit will continue to suffer as lost profits from First-Class Mail are not replaced Revenue Mix by Product 2007 2015 *2020 (Trending) FCM shrinking and provides almost 60% of our contribution FCM switches from almost half of revenue to under one third Shipping and package volume needs to increase 260% to make up FCM shortfall Standard mail needs to increase by 135% to make up FCM shortfall Revenue: $74.9 B $68.9 B ~ $70+ B * Indicative, not a forecast 8

Managing the Business: Innovation & Internal Competition are the Key! Western Northeast Great Lakes Eastern Capital Metro Pacific Southern Northeast

Managing the Business: Innovation & Internal Competition is the Key! Greater Boston Long Island Triboro New York Northern New England Connecticut Albany Westchester Northern New Jersey Valley 10 Districts in the Northeast Area Key Metrics: Service statistics Workhours Workhour rate Processing efficiency Unit total operating expenses Overtime Sick/annual leave hours Earned hours Complement (career/non-career) Valley 010 - 013, 027- 029, 060 - 069

Operating Results July YTD 2016 Actual vs. SPLY Preliminary Operating Results July YTD 2016 Actual vs. SPLY 1 - Change in Accounting Estimate is excluded from Total Revenue. 2 - Temporary exigent surcharge expired April 10, 2016. Estimated exigent revenue earned in April 2016 was immaterial. 3 - Before RHB pre-funding, non-cash adjustments to workers’ compensation liabilities and FERS unfunded liability amortization, which are excluded from controllable expenses. 4 - July YTD FY2016 has 1.5 less retail days and same number of delivery days as compared to FY2015. 5 - Newly available data on prepaid postage resulted in a $1.1B decrease in the liability for deferred revenue - prepaid postage and a corresponding increase in revenue.

Operating Results July YTD 2016 Actual vs. SPLY Preliminary Operating Results July YTD 2016 Actual vs. SPLY 1 - Change in Accounting Estimate is excluded from Total Revenue. 2 - Temporary exigent surcharge expired April 10, 2016. Estimated exigent revenue earned in April 2016 was immaterial. 3 - Before RHB pre-funding, non-cash adjustments to workers’ compensation liabilities and FERS unfunded liability amortization, which are excluded from controllable expenses. 4 - July YTD FY2016 has 1.5 less retail days and same number of delivery days as compared to FY2015. 5 - Newly available data on prepaid postage resulted in a $1.1B decrease in the liability for deferred revenue - prepaid postage and a corresponding increase in revenue.

Operating Results July YTD 2016 Actual vs. SPLY Preliminary Operating Results July YTD 2016 Actual vs. SPLY 1 - Change in Accounting Estimate is excluded from Total Revenue. 2 - Temporary exigent surcharge expired April 10, 2016. Estimated exigent revenue earned in April 2016 was immaterial. 3 - Before RHB pre-funding, non-cash adjustments to workers’ compensation liabilities and FERS unfunded liability amortization, which are excluded from controllable expenses. 4 - July YTD FY2016 has 1.5 less retail days and same number of delivery days as compared to FY2015. 5 - Newly available data on prepaid postage resulted in a $1.1B decrease in the liability for deferred revenue - prepaid postage and a corresponding increase in revenue.

Total Revenue FY2016 July YTD vs. SPLY: (including Exigent Surcharge in 2015 & 2016, but excluding one-time change in accounting estimate in 2016) * FY2015 excludes a one-time, non-recurring accounting adjustment FY2016 July YTD has 1.5 less retail days as compared to FY2015. FY2015 $57.9B FY2016 $59.2B $1.3B FCM Single-Piece Presort Letters & Other Standard Mail Total Shipping & Package International Other * (incl. Periodicals) * FY2015 excludes a one time non-reoccurring accounting adjustment of $160M Preliminary

Focus on Innovation and Investing in Our Business Shifts in Mailing Shipping Patterns Drives Strategy Focus on Innovation and Investing in Our Business Retaining First-Class Mail Digital Integration of Direct Mail Growing Shipping Business Service & Efficiency are the Keys 15

Next Generation Mailbox Customized Delivery Markets Informed Delivery App Ship from Store (Next Day) 34 major customers with over 16,000 locations and 18.7M Packages Trips to the door have reduced significantly Improves customer satisfaction Give the recipient a view into what they’re receiving that day Amazon Fresh (Grocery Delivery) Last week we delivered over 72,000 totes to over 18,000 places USPS Is Adapting to Changing Expectations Ship from Store (Next Day) 23 Major Customers Over 11,200 locations 6.3M packages   Informed Delivery App (Formally Real Mail Notification) Next Generation Mailbox Over 85% of the parcels fit in the box Over 500 boxes currently installed Trips to the door have reduced from 42% to 12% for these customers Improves customer satisfaction Customized Delivery Markets Averaging 5,849 deliveries with over 26,000 per week

Investing in the Future Informed Visibility From Induct to Delivery – Giving Customer Visibility of Mail Mobile Delivery Device 225,000 Fully Deployed (Sept. 2015) Package Sorting Systems 31 Total (SPSS) Systems Next Generation Delivery Vehicle Prototype Contracts Awarded (Sept. 2016) Investing in our Future: Informed Visibility: IV will provide real-time and event-driven mail inventory and predictive workloads Performance and logistics metrics as they happen, monitor containers at-risk, and receive alerts if anything gets off track. Mail Inventory Management and Predictive Workloads End-to-End Measurement of all Mail Enhanced Real-time Service Performance Diagnostics Mobile Delivery Device – Rolled out to every delivery route Next Generation Delivery Vehicles Prototype Contracts Awarded in November 2015

Legislative Platform Key Stakeholder Support Retiree Healthcare Medicare Integration Use Postal Service demographics to determine retirement contributions Maintain/Reinstate Exigent Price Increase (4.3%) Obtain Additional Operational Flexibility Attempt to avoid rate shock by moderate increase and sig cost savings from RHB ,,

Postal Regulatory Commission 10-Year Review

Objectives for 10-Year Price Review Maximize incentives to reduce costs and increase efficiency. Create predictability and stability. Maintain high quality service standards. Allow the Postal Service pricing flexibility. Assure adequate revenues, including retained earnings, to maintain financial stability. Reduce the administrative burden and increase transparency. Enhance mail security and deter terrorism. Establish and maintain a just and reasonable schedule for rates and classifications. Allocate the total institutional costs appropriately.

THANK YOU for your business and partnership!