Dil-i-gence  n [from Latin diligere to esteem, love] 1:  perseverance to honor a commitment by steady, earnest, and energetic effort 2:  the care displayed by employees of the United States Postal Service in handling America's mail, each and every day.

The aftermath of the September 11th terrorist attacks, the economic recession and the anthrax-by-mail contamination resulted in a volume decline of 2.2%, or 4.6 billion pieces of mail, the largest volume decline in Postal Service history. Despite these events, however, we finished the year with a net loss of $676 million, instead of the $1.35 billion loss we had planned last year, before either of the terrorist attacks.

Our revenue increased 1.0% over last year to $66.5 billion. In June, we implemented our rate increase three months early, with an average increase of 7.7%, including a 3-cent increase in the price of a First-Class stamp. Typically, it takes 10 months to litigate an omnibus rate case. Citing the need for “extraordinary acts” in “extraordinary times,” the chairman of the Postal Rate Commission, in October 2001, suggested the process that led to a settlement agreed to by 57 of the 63 participants in the postal rate case. Such a settlement of an omnibus case is unprecedented in the history of the Postal Service.

We reduced operating expenses by 0.6% from last year and brought them to $2.8 billion below plan, another first for the Postal Service. We reduced work hours by 78 million and employment by 23,000 career employees, bringing our complement down to 1995 levels. However, higher costs per work hour, increased workers’ compensation costs and rising health benefit premiums continued to put pressure on our expenses. Premium increases contributed to retiree health benefits expenses, which rose 15% compared to last year.

Cash flow from operations was $1,431 million, reflecting the impact of the June rate increase. Cash outlays for capital spending were $1,705 million. The margin between internally generated cash and cash outlays allowed us to decrease debt by $200 million, the first reduction in our debt since 1997. The federal government provided three appropriations totaling $762 million to offset the effects of the terrorist attacks and to cover the costs of modifying postal systems for the safety and security of employees, customers and the mail. We used $179 million of the appropriations to offset expenses and hold the remaining for the bio-hazard detection and vacuum equipment to be deployed within the postal system in the coming year.

Despite the operational difficulties we faced this year, we achieved record levels of service. Service levels for Express Mail, Priority Mail and First-Class Mail either matched or set new records since the establishment of independent measures. In addition, overall household satisfaction with the Postal Service is back to or exceeds levels achieved before the past year’s crises.