Pride  adj [from Latin prodesse to be advantageous] 1:  a reasonable or justifiable self-respect 2:  the special quality that unites the 750,000 men and women of the United Stated Postal Service.

Liquidity is the cash that we have in the bank (the Postal Service Fund) and the amount of money we can borrow immediately if needed. In recent years we have relied less on the cash we have on hand and more on the readily available cash we can borrow as needed. Our Note Purchase Agreement with the Federal Financing Bank, renewed this year, provides for revolving credit lines of $4 billion. These credit lines enable us to draw up to $3.4 billion with two days’ notice and up to $600 million on the same business day. Under this agreement we can also use a series of other notes with varying provisions to draw upon with two days’ notice.

We are limited in the amount of funds we can borrow by the amount of debt authorized by the Board of Governors and by certain statutory limits on our borrowing. First, our total debt outstanding cannot exceed $15 billion. Second, the net increase in debt for any year cannot exceed $2 billion for capital purposes and $1 billion for operating purposes.

The economic slowdown had a negative impact on our cash flow. In addition, we were the target of multiple acts of terrorism. Both management and the Governors moved immediately to counteract the effects of these actions on our cash flow and liquidity. To increase cash flow on the revenue side, we implemented new postage rates on June 30, three months ahead of schedule. On the disbursement side, we reduced expenses and, therefore, increased our cash flows from operations. By increasing revenue and reducing expenses, we limited our net loss to $676 million. We also continued our freeze on capital facility projects and reduced planned cash outlays for capital by $500 million. In addition, we received $762 million in emergency appropriations, most of which we had not disbursed by the end of the year.

We are currently projecting net income of $600 million and capital expenditures, funded by operations, of $2 billion in 2003. If we achieve these targets, we should generate excess net cash flow that can be applied to debt reduction. Debt reduction beyond 2003 will depend on our ability to operate at close to a break-even net income combined with capital expenditures that approximate our depreciation expense. The requirement that customers pay for postage before mail can be processed reduces our needs for external financing. Any change to this policy would adversely affect our level of debt outstanding. Payment of retirement expenses is not problematic since these expenses are provided for on an ongoing basis in the cost structure of postage rates.