Notes to the Financial Statements

Note 1 — Description of business

Nature of Operations

The United States Postal Service (Postal Service) provides a variety of classes of mail service without undue discrimination among its many customers. This means that, within each class of mail, price does not unreasonably vary by customer for the service provided. This fulfills the Postal Service’s legal mandate to offer universal service at a fair price. Operations are conducted primarily in the domestic market, with international mail representing less than 4% of revenue.

Postal services are divided into two broad categories: Mailing Services and Shipping Services, which represent approximately 87% and 13% of revenue, respectively. First-Class Mail and Standard Mail account for about 94% of mail volume, and Priority Mail and Express Mail are significant products in the Shipping Services category. Markets for products and services include the financial services, communications, distribution, delivery, advertising, and other market sectors. Products and services are sold through over 32,000 Post Offices, stations, branches, contract postal units, and a large network of commercial outlets which sell stamps on our behalf.

More than 85% of career employees are covered by collective bargaining agreements and are 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). By law, the Postal Service also consults with management organizations representing most of the employees not covered by collective bargaining agreements. These consultations provide an opportunity for non-bargaining employees in the field to participate directly in the planning, development, and implementation of programs and policies affecting managerial employees.