Financial Section Part I

Intellectual Property

We own intellectual property that includes trademarks, service marks, patents, copyrights, trade secrets, and other proprietary information. We routinely generate intellectual property in the course of developing and improving our systems, services, and operations.

Seasonal Operations

Our operations are seasonal. Mail volume and revenue tend to be greatest in our first fiscal quarter, which includes the fall holiday mailing season, and lowest during the summer, our fourth quarter.

Customers

We have a very diverse customer base and we are not dependent upon a single customer or small group of customers. No single customer represents more than two percent of our revenue.

Government Contracts

No material portion of our business is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the U.S. government.

Research and Development

We operate a research and development facility in Virginia for design, development, and testing of postal equipment and operating systems. We also contract with independent suppliers to conduct research activities that benefit us. While research and development activities are important to our business, these expenditures are not material.

Environmental Matters

We are not aware of any federal, state, or local environmental laws or regulations that will materially affect our financial results or competitive position or result in material capital expenditures. However, we cannot predict the effect of possible future environmental legislation or regulations on our operations.

Employees

At September 30, 2007, we had 684,762 career employees, substantially all of whom reside in the United States. We also had 101,167 noncareer employees.

Our labor force is primarily represented by the American Postal Workers Union (APWU), National Association of Letter Carriers (NALC), National Postal Mail Handlers Union (NPMHU) and National Rural Letter Carriers Association (NRLCA). More than 85% of our career employees are covered by collective bargaining agreements. By law, we consult with management organizations representing most of the employees not covered by collective bargaining agreements. These consultations provide an opportunity to participate directly in the planning, development, and implementation of programs and policies affecting nonbargaining employees in the field. Our management organizations include the National Association of Postal Supervisors, the National League of Postmasters, and the National Association of Postmasters of the United States. We participate in federal employee benefit programs as required by statute, for retirement, health and workers’ compensation benefits.

Available Information

Financial and other information is available on www.usps.com; click on “About USPS and News.” Information on our website is not incorporated by reference in this document.

We make available on our website, free of charge, copies of our annual report, quarterly reports and current reports, as soon as reasonably practicable after they are filed with or provided to the PRC. Requests for copies may also be sent to:

United States Postal Service
Public Affairs and Communications
475 L’Enfant Plaza, SW
Washington, DC 20260-3100.