PSA REPORT. (

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1 PSA Report PSA Members, PSA REPORT ( This report focuses on three developments: (1) a report on this week s House Postal Reform Hearing, (2) the release of USPS Quarter 1 Financial results today and (3) a reminder from PostalVision On Capitol Hill Since there is no need to reinvent the wheel, there follows a very good report on this week s postal reform hearing that appeared in Government Executive. We continue our Hill meetings with member offices yesterday and today. Reports are good on support for the bill. In a nutshell, virtually all stakeholders have concluded that legislation must be passed soon to address the liabilities Congress placed uniquely on the USPS as a rider to the 2006 reform law. And the solution is to permit the USPS to employ private sector best practices to its employee benefit programs especially Medicare integration. The tentative target for the Committee to consider the bill for approval is early March. That would start it on its legislative journey. The Committee lists these takeaways on its website: USPS is past the point where it is salvageable as it exists now legislation is necessary to implement needed reforms. USPS has more than $119 billion in unfunded liability, and is projected to run out of cash. The postal delivery fleet is at the end of its expected life. Average age of vehicles is 24 years. o USPS is working with six suppliers for a new fleet that will be tested in the next 18 months. o USPS is awaiting responses for commercial off-the-shelf options. All four of the major postal employee unions support H.R. 756, the Postal Service Reform Act of

2 Links to the written testimony presented at the hearing are here: Postmaster General Brennan PRC Chairman Taub GAO Director Lori Rectanus 21 st Century Manager Art Sackler NALC President Rolando From The Government Executive: There May Finally Be a Breakthrough in the Long Fight for Postal Reform {click for entire article] By Eric Katz February 7, 2017 The four major unions representing U.S. Postal Service employees have all thrown their support behind a renewed effort to overhaul the agency, providing what supporters are calling a watershed event in the drawn-out battle for reform. Lawmakers expressed broad bipartisan support for the 2017 Postal Reform Act at a House Oversight and Government Reform Committee hearing Tuesday, saying the time has long since passed for Congress to act on USPS behalf. Republicans on the committee and witnesses at the hearing said reform is urgent, arguing that doing nothing would result in a taxpayer-funded bailout of the mailing agency. Lawmakers have struggled in each of the last several sessions of Congress to bring together the array of different interests in USPS affairs, but appeared to reach a breakthrough with their latest efforts. Unlike previous attempts at postal reform, the National Association of Letter Carriers, the American Postal Workers Union, the National Rural Letter Carriers Association and the National Postal Mail Handlers Union all threw their support behind the bill. Art Sackler, head of the Coalition for a 21st Century Postal Service -- a group representing dozens of private sector businesses in mailing and other industries -- also announced his association s full backing. Postmaster General Megan Brennan said her agency supported the bill as well. Rep. Jason Chaffetz, R-Utah, the bill s author and the oversight committee s chairman, worked on getting another powerful ally on board Tuesday, pitching postal reform during his 30-minute meeting with President Trump at the White House. -more- Postal Service Reports Quarter 1 Financials The USPS Release begins on the next page. Sandy Glick has dug in already and points out that Shipping and Packages revenue ($5.5 billion) was much higher than Standard Mail (now Marketing Mail) revenue ($4.7 billion). Package delivery is continuing to provide greater and greater financial support to the Postal Service. 2

3 FOR IMMEDIATE RELEASE May 10, 2016 Contact: Sarah Ninivaggi usps.com/news U.S. Postal Service Reports Fiscal Year 2016 Second Quarter Results Operating revenue grew 4.7 percent to $17.7 billion Controllable income totaled $576 million; net loss of $2.0 billion reported Postal Service revenue benefited from exigent surcharge, which expired on April 10, 2016 Legislative reform and focus on innovation and efficiency remain necessary WASHINGTON -- The U.S. Postal Service reported operating revenue of $17.7 billion for the second quarter of fiscal year 2016 (January 1, March 31, 2016), an increase of $788 million or 4.7 percent over the same period last year. The increase was primarily due to an 11.4 percent increase in Shipping and Package volume and pricing strategies. While we have been successful in achieving controllable income during the quarter, we are still reporting net losses and contending with long-term financial challenges, said Postmaster General and Chief Executive Officer Megan J. Brennan. We continue to focus on improving operating efficiencies, speeding the pace of innovation, and increasing revenues for the Postal Service. Controllable income for the quarter was $576 million compared to $313 million for the same period last year. Calculation of controllable income takes into account the impact of operational expenses including compensation, benefits and work hours; but does not reflect factors such as the legally-mandated expense to prefund retiree health benefits (see Non-GAAP Financial Measures table on following page for full description). Net loss for the quarter was $2.0 billion compared to $1.5 billion for the same period last year. The change in net loss was most significantly impacted by a $547 million unfavorable change in the workers' compensation expense as a result of interest rate changes - a factor outside of management s control. Operating expenses also increased in the second quarter compared to the same period last year, driven by increased work hours and transportation expenses due in large part to the increase in package volume. Labor costs increased by $362 million, and transportation expense increased by approximately $149 million. "During the second quarter, we expanded work hours and our transportation network, taking more trips and increasing miles flown," said Chief Financial Officer and Executive Vice President Joseph Corbett. This largely resulted from strategic business decisions enacted to accommodate package growth and enhance service across the country. I am grateful to our dedicated employees who helped us to achieve controllable income this quarter, but we cannot let this result mask the financial challenges we face, said Brennan. Our financial situation is serious, but solvable. We are confident that we can return to financial stability through the enactment of prudent legislative reform and a favorable resolution of the upcoming regulatory review of our rate-setting system.

4 Selected Second Quarter 2016 Results of Operations Compared to Same Period Last Year The following table presents certain selected results of operations for the three months ended March 31, 2016 and 2015: (volume results in millions of pieces; financial results in $ millions) 2016* 2015 % Volume Standard Mail 19,464 19, % First-Class Mail 15,927 15, % Periodicals 1,366 1,447 (5.6)% Shipping and Packages 1,227 1, % International % Other (6.6)% Total volume 38,300 37, % Operating revenue and expenses Operating revenue (excluding temporary exigent surcharge) $ 17,215 $ 16, % Temporary exigent surcharge (0.8)% Total operating revenue $ 17,734 $ 16, % Operating expenses $ 19,760 $ 18, % Net loss $ (2,040) $ (1,469) 38.9 % Workers' compensation expense Impact of discount rate changes $ 948 $ % Actuarial valuation of new cases and revaluation of existing cases % Administrative fee % Total workers compensation expense $ 1,454 $ % * The three months ended March 31, 2016 had one additional business day compared to the same period in Non-GAAP Financial Measures Included in this news release is controllable income, which is not calculated and presented in accordance with accounting principles generally accepted in the United States (GAAP). Controllable income is a non-gaap financial measure defined as net income subtracting operating expenses considered outside of management s control. These expenses include the mandated prefunding of retirement health benefits, actuarial revaluation of retirement liabilities and non-cash workers compensation adjustments. The following table reconciles GAAP net loss to controllable income and illustrates the income from ongoing business activities without the impact of non-controllable items for the three months ended March 31, 2016 and 2015:

5 (in $ millions) Net loss $ (2,040) $ (1,469) Impact of: PSRHBF prefunding expense 1,450 1,425 Change in workers' compensation liability due to fluctuations in discount rates Other change in workers' compensation liability (44) Actuarial revaluation of retirement liability 2 60 Controllable income $ 576 $ This is a net amount that includes changes in assumptions as well as the valuation of new claims and revaluation of existing claims. 2 Determined by OPM in 2015 to amortize the $3.5 billion unfunded FERS retirement obligation based on actuarial valuations and assumptions. The payments are to be made in equal installments over the next 30 years. The 2015 expense of $241 million was recorded in full during the fourth quarter of Complete financial results are available in the Form 10-Q, available at Financial Briefing Postmaster General and CEO Megan J. Brennan and Chief Financial Officer and Executive Vice President Joseph Corbett will host a telephone/web conference call to discuss the financial results in more detail. The call will begin at 9:30 am on May 10, 2016 ET and is open to news media and all other interested parties. How to Participate: Important Notice: To ensure your computer is set up to join the event, click on the link US/Canada Attendee Dial-in: (855) Conference ID: Attendee Direct URL: If you cannot join using the direct link above, please use the alternate logins below: Alternate URL: Event Number: The briefing will also be available on live audio webcast (listen only) at: The Postal Service receives no tax dollars for operating expenses and relies on the sale of postage, products and services to fund its operations. # # # Please Note: For broadcast quality video and audio, photo stills and other media resources, visit the USPS Newsroom at about.usps.com/news/welcome.htm. A complete list of the holiday shipping deadlines can be found at usps.com/holidaynews. For reporters interested in speaking with a regional Postal Service public relations professional, please go to about.usps.com/news/media-contacts/usps-local-media-contacts.pdf. Follow us on Twitter (twitter.com/usps), Instagram (instagram.com/uspostalservice), Pinterest (pinterest.com/uspsstamps), LinkedIn (linkedin.com/company/usps), subscribe to our channel on YouTube (youtube.com/usps), like us on Facebook (facebook.com/usps) and view our Postal Posts blog (uspsblog.com). For more information about the Postal Service, visit usps.com and usps.com/postalfacts.

6 PostalVision 2020 Early Bird Ends Today Hi I wanted to let you know that we decided to extend our early bird rates for our March event through Feb 10. It would be great if you could send the below message (or your version of it!) out to your members ASAP to let them know! Subject: Early Bird Rates Extended; Preview of Speakers PostalVision 2020 has extended its Early Bird registration rates through February 10, 2017, and announced a preview of speakers and content for its March 21-22, 2107 event! And don t forget that as an Association Partner, PSA members get an additional $200 discount off the current registration rates (use Discount Code PSA when registering!). Check out PV2020 s speaker preview announcement (more to come over the next couple of weeks!) posted on its web site ( to get just a taste of the great speaker and content line-up for the March event. The full PostalVision 2020/7.0 Business NOT As Usual agenda will be announced soon. As part of its sneak preview, PV2020 announced a few of the inspiring speakers for the event, including Jeff Jarvis (just back from the World Economic Forum); who will help attendees envision a future ecosystem reshaped by the digital economy; SAP s Ruth Eberhart will share industry-specific views of Value Creation by Postal Services in a Digital Economy; Bernhard Bukovc of the Europe-based Postal Innovation Platform (PIP) will moderate a line-up of distinguished speakers from abroad; Wolfgang Hall, global GIS leader, Esri, will share insights on business in this new digital economy; 3D printing/additive manufacturing will addressed by Gil Perez of SAP (who recently have partnered with UPS in this space); brand-leading sponsors FedEx, UPS, Accenture, Bell and Howell, CargoGlide and OpenMarket will join the conversation; a panel of experts will talk about new digital-physical connections; and experts will discuss the complex and burdgeoning returns/reverse logisticsmarket and more! REGISTER NOW to get the lowest rates available between now and the event! And stay tuned for more info on additional speakers and content to come soon! That s it for today. Call or if you have questions or we can assist your company in any way. ### Pierce 4