I am proud to celebrate a year of great accomplishment. Our $3.9 billion net income is by far the largest net income ever earned. This net income erased more than two-thirds of the $6 billion deficit that had grown since postal reorganization in 1971 and thereby eliminated the $3 billion net capital deficiency.

     We are making great strides in improving our financial management. With our positive cash flow we reduced our debt by $3.8 billion. We refinanced our debt, reducing our average interest rate from 5.1% to 1.1% and gaining additional flexibility to manage and retire debt in 2004. As a result of these accomplishments, we are on our soundest financial footing in many years and can defer the next general rate increase until at least 2006.

     I would like to thank the men and women of the Postal Service for their contributions to this success. They worked together to produce record high levels of service, highlighted by an all-time high 95% overnight service performance for First-Class Mail and residential customer satisfaction metrics that rose to 94% in the last quarter of the year. At the same time, we achieved an unprecedented fourth straight year of productivity growth. Through the end of 2003, we estimate that we have achieved $2.7 billion of the $5 billion in cost savings and expense reductions we committed to realize over five years in our 2002 Transformation Plan.

     My appreciation also extends to the efforts of the legislative and executive branches of the federal government, and the stakeholders who supported their efforts, for the rapid action on pension reform which resulted in Public Law 108-18, the Postal Civil Service Retirement System Reform Act of 2003. Without this law, we had already overfunded our CSRS pension obligation and were on course to overfund by a total of $105 billion.

     While our strong financial performance is grounds for celebration, it masks long-term trends negatively affecting the viability of our business model. Again this year, the postal system grew by 1.9 million delivery points. Yet, volume dropped for the third straight year, and First-Class Mail volume declined by over 3 billion pieces to a level 4.6 billion pieces below its peak volume in 2001. Although we have historically depended on high contribution First-Class Mail to finance the growth of our delivery network, its decline means we can no longer rely on this contribution. We are challenged to find new expense reductions and revenue growth to compensate for the decline in this historic funding source.

     In the last year, we established a new internal control group, developed a new accounting general ledger system, posted on the worldwide web quarterly reports on financial condition and results, and incorporated into this Annual Report expanded disclosures on legal proceedings, auditor fees, Postal Service operations, capital and financing. In 2004 we will report our interim financial results on a monthly basis as opposed to the thirteen, twenty-eight day periods we used previously.

     We will continue to do everything possible to ensure the financial health of the Postal Service and to provide the outstanding service that our customers, the American people, have come to expect.