In this section we discuss our finances, including the successes we had, the challenges we face, our plan for the future and the risks that lie ahead. If we were a private sector company seeking profit and return to shareholders, the financial analysis of our results would focus primarily on our bottom line, which this year is a loss of $1.7 billion. However, we are an "independent establishment of the executive branch" wholly owned by the U.S. government and its citizens. Our financial goal is to cover costs through revenue generated by the services we provide. This year your Postal Service responded to significant financial challenges, lower than expected revenue and rapidly increasing personnel and benefits costs. While continuing to increase the universal delivery network with an additional 1.7 million addresses, we reduced career employment by over 11,500. The result was a level of productivity that averted what could have been a much greater loss.

Our universal service mandate means we deliver to everyone, everywhere, and we do not charge whenever we add a new delivery address. To meet this increased demand, we need to invest approximately $600 million in new facility space each year, beyond the cost of replacement facilities. Not making these investments each year can, over time, affect our ability to fulfill our universal service mandate. When our competitors' fuel and other costs increased, they immediately increased their prices. When our fuel and other costs increased, we immediately prepared a request for a rate increase, and began a process that can take up to 18 months before our prices change. Thus, while the statute under which we operate requires us to provide universal service, it does not give us the ability to quickly change our rates whenever our costs go up or down. Nevertheless, the Postal Service maintained service, reduced costs and minimized the financial loss in 2001.