PSA REPORT. Now for some news. There have been several important developments recently.

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1 P REPORT July 2, 2014 P Members, P Seminar Update Please note the dates for our October Seminar and Dinner. The Seminar and Seminar Dinner will be Thursday October 2. The meeting will at the National Postal Museum in Washington, DC. We will begin at 8:30 and end by 4. We will have a tour of the Museum as part of the program. Dinner will be that night at a local restaurant with a guest speaker. We will have committee and Board meetings the afternoon of Wednesday, October 1, with our usual informal members dinner that evening. PLEASE NOTE THE DATES OUR LAST REPORT WERE CORRECT. Now for some news. There have been several important developments recently. Priority Mail Price Changes In a move that caught almost every one by surprise, the Postal Service yesterday announced some changes in its Priority Mail prices. Sandy Glick reports: The Postal Service today announced that, on September 7, it will reduce commercial Priority Mail prices for heavier, Zone 1 4 packages. The Postal Service expects these price decreases will enhance its competitive position in the market for 6 20 pound, ground parcels. The percentage decreases in some instances are quite large. You can read the entire release at releases/2014/pr14_039.htm. The changes are planned to go into effect some time in September, following review by the Postal Regulatory Commission. According to the USPS Release (attached): Both Commercial Base and Commercial Plus prices will be reduced on average, with most of the decreases concentrated in the ground zones weighing between 7 16 pounds. Price for Commercial Base customers will be reduced on average by 0.9 percent, and prices for Commercial Plus customers will decline on average 2.3 percent.... Highlights of the new proposed retail pricing for Priority Mail products include: _Small box $5.95 June 30,

2 _Medium box $12.65 _Large box $17.90 _Large APO/FPO box $15.90 _Regular envelope $5.75 _Legal envelope $5.90 _Padded envelope - $6.10 If you have contract rates with USPS this may not affect you. It appears to be an effort to slip in a retail price increase for a growing product before the holiday mailing season. The commercial price changes are focused on the heavier packages where USPS is not as competitive, and also may be an attempt to play off the recent dimensional weight pricing announcements from some competitors. USPS Announces Phase II of Network Consolidation Late last week USPS announced it plans to launch Phase II of its Network Plant consolidation effort in January It says that as many as 82 plants may be affected. Originally scheduled to begin last February, USPS says financial difficulties provide the impetus for further consolidation. The full release and the list of facilities involved are attached. For more information and to stay on top of this visit: press kits/our future network/welcome.htm Saturday (6 day) Delivery. The Postal Service s relentless push to remove the Congressional prohibition on eliminating a mail delivery day was dealt a major setback just before Congress recessed for the 4 th of July break. Committees in both the House and the Senate voted decisively to continue the law that requires the Postal Service to delivery 6 days a week for another year. This law has been renewed every year since it was first enacted in the 1980 s. Separate postal reform bills that would permit the move to 5 day for letters and flats (packages would continue to be delivered at least 6 days) have been pending but stalled, largely because of opposition to the move to 5 day. It now appears almost certain 6 day will continue at least for another year. And, in any event, 6 day package delivery appears safe under any scenario. To give you a flavor of the House committee debate, below is a staff summary of it: Postal Service Delivery: Representative Serrano s (D NY) amendment, as he described, would restore language that the postal service maintain six day delivery. He suggested the economy would lose many jobs, including veterans. He suggested that getting rid of the six day delivery may lead to a loss in revenue. Her suggested the system needed an overhaul of the system, particularly as to healthcare payments. The amendment was co sponsored by Representative Latham (R IA). Representative Crenshaw (R ) stated that the language on June 30,

3 postal service delivery was not in the bill due to the financial issues that the postal service faces. Representative DeLauro (D CT) expressed support for the amendment and noted the need for mail by seniors and others. She suggested that there was a need to deal with the real issue, the USPS pre funding rule for retiree benefits. She suggested that this is burdening the postal service. If the post office did not pay into this fund, she suggested the postal service would be fine. Representative Aderholt (R AL) noted the elimination of Saturday delivery, means that 20% of the year, there would only be delivery from the postal service 4 days a week due to holidays. He also noted that mail delivery serves as a backup to a cyber attack. Several Members on both sides of the aisle expressed support for the amendment. The amendment was approved via voice vote. Legislative Update Aside from the report on 6 day above, there has no action in Congress on postal matters, or anything else for that matter. This Congress seems likely to go down as the least productive Congress ever! While some times Congressional inaction is welcome (as Will Rogers once said, Sleep well tonight, Congress has adjourned), there really are some things that need to be addressed because they cannot be fixed without Congress acting. These include the need to restructure postal employee benefit financing to substantially reduce future financial liabilities. We are pushing adopting private sector best practices that could improve the USPS balance by about $45 55 Billion. But legislation is stalled over fights about Saturday delivery, turf wars between the USPS and the PRC, and how to address the 4.3% exigency price increase the PRC approved late last year. The latter has tied the industry in knots. Below are excerpts from my report to the Executive Committee last week. We are continuing our discussions on a legislative package. The deal is essentially the same as I have briefed the membership on since late last year. We continue to work through the 21st Century Coalition. The Coalition is representing the industry in discussions with the unions and the Congress, and as you know I am on its Executive Board. Under the proposed deal exigency rates are rolled back 90 days after enactment (much sooner than under the pending PRC order) but Market Dominant rates would be temporarily (through 2017 or 2018) 1% higher than otherwise permitted by the existing price cap, although the cap itself is not changed. Saturday delivery would continue, plant consolidation could continue but service standards could not be changed, and employee benefit funding would be restructured to adopt private sector best practices and reduce USPS future liabilities by about $50 billion. The end result, using USPS economic assumptions, is a solvent, debt free Postal Service for at least 10 years. Of course these are just best estimates, but here are the other alternatives taking into account possible legislative and judicial actions: Case 1 no legislation, exigency rolls back around August 2015, USPS continues to struggle and will become insolvent. Case 2 legislation makes the exigency (4.3%) permanent as proposed by USPS, the Senate Committee, and the Obama Administration. This is attractive to Congress because it scores as a substantial reduction in the federal budget deficit (this is screwy, but trust me I did this stuff for 10 years). Case 3 Court rules in USPS favor, exigency becomes permanent June 30,

4 It is completely understandable that mailers do not want to support anything that can be labeled as a rate increase. But those who have been close to these issues, have taken the opportunity afforded them to be fully briefed along the way, had every concern they raised considered and dealt with if at all possible, and have a modicum of political sense are generally biting the bullet, accepting a modest rate increase, and hoping that will mitigate the tremendous damage that could be done to the industry otherwise. They are also mindful that this same deal could have been had last fall and the exigency increase avoided but for the stubbornness of a few who insisted on fighting a battle where the odds were almost hopelessly stacked against them. Despite the best efforts of those who represented the industry at the PRC, the decision to fight resulted in a 6% increase last January as opposed to a 2.7% increase that was left on the negotiating table. This diverted substantial time, money and resources fromm other efforts to improve circumstances for our industry. Most recently some very inaccurate and inflammatory rants have been blasted that have achieved nothing except to tarnish the industry s image and support the notion of greedy mailers that some have effectively promoted on Capitol Hill to our great detriment. This is unfortunate and tends to erode and will continue to erode our ability to garner supporters where it counts on Capitol Hill. And, we are down to very few supporters as it is. Nothing is certain in legislation and politics, so you can only go with best judgments. Sometimes even the best alternative is not one you would prefer, but that s just the way it is. IMPB Webinar The Postal Service has announced a July 8 th webinar, 10 a.m. to provide a basic review of the features, benefits and requirements of the Intelligent Mail package barcode (IMpb), recent IMpb related developments and a look at future enhancements. Details are attached at the end of this report. Wishing you a great Independence Day weekend. Pierce June 30, 2014 Attachments. DMM Advisory Pricing keeping you informed about the prices and mailing standards of the United States Postal Service June 30,

5 Rationalization of our Network of Mail Processing Facilities Dear Valued Customer, The United States Postal Service is planning to resume the rationalization of our network of mail processing facilities which began in To provide adequate time for planning and preparation, the Postal Service is providing this six-month advance notice of consolidations, for up to 82 facilities, which will begin early January 2015 and be completed by the fall mailing season. The Postal Service will provide detailed information about its network rationalization planning in the coming weeks. As with prior network rationalization efforts, the Postal Service will work closely with customers to mitigate potential issues associated with transportation and logistical requirements. In 2012 and 2013, the Postal Service consolidated 141 mail processing facilities. This rationalization was highly successful, resulted in negligible service impact, generating annualized cost savings of $865 million and required no employee layoffs. The Postal Service expects the completion of this phase of network rationalization will generate an additional $750 million in annual savings. Why are we taking this step now? Over the past three years, the Postal Service recorded financial losses of $26 billion. The Postal Service receives no tax-payer funds to pay for operating costs and derives all of its revenues from the sale of our products and services, and continues to face significant financial challenges associated with the decline of First-Class Mail volume and revenue, wage and benefit inflation, increasing operating costs, as well as legislative mandates and significant debt pressures. Moreover, the uncertainty regarding legislative reform and review of postal rates in the courts continues to delay needed capital investments to acquire package sorting equipment and replace an aging mail delivery fleet. We believe strongly that this phase of network rationalization will establish the low-cost, technology-centric delivery platform necessary to serve the mailing and shipping industry for decades to come. We look forward to discussing our specific plans for our network in the coming weeks. The Domestic Mail Manual (DMM ) and DMM Advisories are available on Postal Explorer (pe.usps.com) June 30,

6 Future Network Rationalization Planned AMP Consolidations Continuation of Phase I consolidations dependent on completion of North Houston facility expansion Consolidation Facility Gaining Facility(ies) Area Facility City State Area Gaining Site City State 1 2 Beaumont P&DF Houston Beaumont Houston North Houston P&DC North Houston P&DC Houston Houston Planned Phase 2 Consolidations Consolidation Facility Gaining Facility(ies) Area Facility City State Area Gaining Site City State PA Huntsville P&DF Tucson P&DC Eureka CSMPC Huntsville Tucson Eureka AL AZ Birmingham P&DC Phoenix P&DC Medford CSMPC Birmingham Phoenix Medford AL AZ OR 4 PA Industry P&DC City of Industry PA Santa Ana P&DC (letters) Santa Ana PA Anaheim P&DC (flats) Anaheim 5 PA 6 PA 7 North Bay P&DC Redding CSMPC Colorado Springs P&DC Petaluma Redding Colorado Springs CO PA PA Oakland P&DC West Sacramento P&DC Denver P&DC Oakland West Sacramento Denver CO 8 Southern Connecticut P&DC Wallingford CT Hartford CT P&DC Hartford CT Springfield NDC Springfield 9 10 Stamford P&DC Gainesville P&DC Stamford Gainesville CT Westchester NY P&DC Jacksonville P&DC White Plains Jacksonville NY 11 Manasota P&DC Sarasota Fort Myers P&DC Fort Myers Tampa P&DC Tampa CM Mid-Florida P&DC Athens GA P&DF Mid-Florida Athens GA CM Orlando P&DC North Metro P&DC Orlando Duluth GA 14 Augusta P&DF Augusta GA CM Columbia P&DC West Columbia SC Macon P&DC Macon GA EA Pocatello ID CSMPC Fox Valley P&DC Gary P&DC Kokomo P&DF Lafayette P&DF Muncie P&DF South Bend P&DC Salina KS P&DF Campton CSMPC Pocatello Fox Valley Gary Kokomo Lafayette Muncie South Bend Salina Campton ID IL KS KY EA Salt Lake City P&DC So Suburban P&DC So Suburban P&DC Indianapolis P&DC Indianapolis P&DC Indianapolis P&DC Fort Wayne P&DC Wichita P&DC Louisville P&DC Salt Lake City Bedford Park Bedford Park Indianapolis Indianapolis Indianapolis Fort Wayne Wichita Louisville UT IL IL KS KY 24 EA Lexington P&DC Lexington KY EA Louisville P&DC Louisville KY EA Knoxville TN P&DC Knoxville TN 25 EA 26 Paducah P&DF New Orleans P&DC Paducah New Orleans KY LA EA Evansville P&DF Baton Rouge P&DC Evansville Baton Rouge LA 27 Central Mass P&DC Shrewsbury Boston P&DC (ltrs only) Boston Middlesex Esx P&DC (flts North Reading only) 28 Middlesex Essex P&DC North Reading Boston P&DC Boston June 30,

7 Consolidation Facility Gaining Facility(ies) Area Facility City State Area Gaining Site City State Boston P&DC (ltrs only) Boston 29 Northwest Boston P&DF Waltham Middlesex Esx P&DC (flts North Reading only) 30 CM Southern Maryland Capital Heights MD CM Suburban P&DC Gaithersburg MD 31 Iron Mountain P&DF Kingsford MI Green Bay P&DC Green Bay WI 32 Kalamazoo P&DC Kalamazoo MI Grand Rapids P&DC Grand Rapids MI 33 Lansing P&DC Lansing MI Michigan Metroplex Pontiac MI Grand Rapids P&DC Grand Rapids MI 34 Bemidji CSMPC Bemidji MN Minneapolis P&DC Minneapolis MN 35 Duluth P&DF Duluth MN Saint Paul P&DC Saint Paul MN 36 Mankato P&DF Mankato MN Minneapolis P&DC Minneapolis MN 37 Saint Cloud P&DF Waite Park MN Minneapolis P&DC Minneapolis MN 38 Cape Girardeau P&DF Cape Girardeau MO Saint Louis P&DC Saint Louis MO 39 Springfield MO P&DF Springfield MO Kansas City P&DC Kansas City MO 40 Grenada CSMPC Grenada MS Jackson P&DC Jackson MS 41 Gulfport P&DF Gulfport MS Mobile P&DC Mobile AL 42 Hattiesburg CSMPC Hattiesburg MS Mobile P&DC Mobile AL 43 CM Asheville P&DF Asheville NC CM Greenville P&DC Greenville SC 44 CM Fayetteville NC Annex Fayetteville NC CM Fayetteville P&DC Fayetteville NC 45 CM Fayetteville P&DC Fayetteville NC CM Charlotte P&DC Charlotte NC CM Raleigh P&DC Raleigh NC 46 CM Rocky Mount P&DF Rocky Mount NC CM Raleigh P&DC Raleigh NC 47 Minot CSMPC Minot ND Bismarck P&DF Bismarck ND 48 Grand Island P&DF Grand Island Omaha P&DC Omaha 49 Norfolk P&DF Norfolk Omaha P&DC Omaha 50 Elko CSMPC Elko NV Salt Lake City P&DC Salt Lake City UT 51 Mid-Hudson P&DC Newburgh NY Albany P&DC Albany NY 52 Queens P&DC Flushing NY Brooklyn P&DC Brooklyn NY 53 EA Akron P&DC Akron OH EA Cleveland P&DC Cleveland OH 54 EA Dayton P&DC Dayton OH EA Columbus P&DC Columbus OH 55 EA Toledo P&DF Toledo OH EA MI Metroplex P&DC Detroit P&DC Columbus P&DC Pontiac Detroit Columbus MI MI OH 56 EA Youngstown P&DF Youngstown OH EA Cleveland P&DC Cleveland OH 57 Tulsa P&DC Tulsa OK Oklahoma City P&DC Oklahoma City OK 58 Bend CSMPC Bend OR Portland P&DC Portland OR 59 Eugene P&DF Springfield OR Portland P&DC Portland OR 60 Pendleton CSMPC Pendleton OR Portland P&DC Portland OR 61 EA Erie P&DF Erie PA EA Pittsburgh P&DC Pittsburgh PA EA Rochester P&DC Rochester NY 62 EA Lancaster P&DF Lancaster PA EA Harrisburg P&DC Harrisburg PA 63 EA Scranton PA P&DF Scranton PA EA Lehigh Valley PA P&DC Lehigh Valley PA 64 CM Florence P&DF Florence SC CM Columbia P&DC Columbia SC 65 Dakota Central P&DF Huron SD Sioux Falls P&DC Sioux Falls SD 66 EA Chattanooga P&DC Chattanooga TN EA Nashville P&DC Nashville TN CM Atlanta P&DC Atlanta GA 67 EA Jet Cove Annex Memphis TN EA Memphis TN P&DC Memphis TN 68 Abilene CSMPC Abilene Austin P&DC Austin Midland P&DF Midland 69 Corpus Christi P&DC Corpus Christi San Antonio P&DC San Antonio 70 Provo CSMPC Provo UT Salt Lake City P&DC Grand Junction CSMPC Las Vegas P&DC Salt Lake City Grand Junction Las Vegas UT CO NV 71 CM Norfolk P&DC Norfolk VA CM Richmond P&DC Sandston VA 72 EA Roanoke P&DC Roanoke VA CM Greensboro P&DC Greensboro NC 73 Seattle East DDC Redmond Seattle P&DC Seattle 74 Tacoma P&DC Tacoma Seattle P&DC Seattle 75 Wenatchee CSMPC Wenatchee Spokane P&DC Spokane June 30,

8 Consolidation Facility Gaining Facility(ies) Area Facility City State Area Gaining Site City State Eau Claire P&DF Eau Claire WI Saint Paul P&DC Saint Paul MN 29 La 77 Crosse P&DF La Crosse WI Saint Paul P&DC Saint Paul MN Madison 78 P&DF Madison WI Milwaukee P&DC Milwaukee WI Wausau 79 P&DF Rothschild WI Green Bay P&DC Green Bay WI Rock 80 Springs CSMPC Rock Springs WY Salt Lake City P&DC Salt Lake City UT * * * * * * IMpb Overview July 8 at 10 a.m.(edt) This webinar provides a basic review of the features, benefits and requirements of the Intelligent Mail package barcode (IMpb), recent IMpb related developments and a look at future enhancements. Join us as we discuss new requirements and conditions relating to the January 26, 2014,IMpb implementation. Please visit us on the USPS Industry Outreach website to view the upcoming webinar schedule and webinar archive presentations. Instructions for participating in the webinar appear below: Attendee Information: Date and Time: Tuesday, July 8, :00 am, Eastern Daylight Time (New York)Event number: Event address for attendees: Teleconference information U.S./Canada Attendee Dial in: (888) Conference ID: Please visit us on the USPS Industry Outreach website. Thank you for your support of the United States Postal Service. Consumer and Industry Affairs To subscribe or unsubscribe to Industry Alerts, please click here and send us your request. 8