Our total revenue increased $2.1 billion to $68.8 billion in 2003 while our total expenses decreased by $2.5 billion to $64.9 billion. Our revenue grew because of the postal rate increases we implemented on June 30, 2002. Our expenses declined primarily because of a $3.4 billion reduction in expense for the Civil Service Retirement System, as well as a reduction in compensation and benefits due to 24,000 fewer career employees.

     Although the amount of mail we delivered declined from 202.8 billion pieces in 2002 to 202.2 billion pieces in 2003, we delivered mail to 141.4 million addresses, which is 1.9 million more addresses than we delivered to in 2002. While we deliver to 5.4 million more addresses than in 2000, the amount of mail we delivered has declined by 5.7 billion pieces since that time.

     We do not plan to increase rates in 2004, nor do we expect revenue to grow from volume and volume mix changes.

     In 2004, we will realize a smaller expense reduction from retirement reform because we will make the new normal cost contribution of 17.4% (increased from 7%) of CSRS employee salaries for the full year, instead of half the year as in 2003. Our total number of employees should continue to decline, but at a slower rate, due to the stabilization of our workload. We expect these factors, along with inflation and the cost of serving an expanding delivery network, to result in a 2004 net income of about half of our 2003 net income of $3.9 billion.

     If we achieve our net income goal in 2004, we will nearly eliminate our remaining $2.2 billion deficit since postal reorganization. We will also generate positive cash flow to pay down our debt by more than $4 billion, resulting in a total debt at the end of 2004

     The Postal Service (we) commenced operations on July 1, 1971 in accordance with the provisions of the Postal Reorganization Act. We provide mail service to the public, offering a variety of classes of mail service. Under the Postal Reorganization Act, we have a legal mandate to offer a "fundamental service" to the American people on a "fair and equitable basis." Our primary lines of business are First-Class Mail, Standard Mail, Priority Mail, Periodicals and Package Services. In addition to the individual and commercial customers whom we serve throughout the nation, the principal markets for these services are the communications, distribution and delivery, advertising and retail markets. Our products are distributed through our more than 37,000 Post Offices and a large network of consignees. Mail is delivered to 141 million city, rural, post office box and highway contract delivery points. We conduct our significant operations primarily in the domestic market, with international operations representing less than 3% of our total revenue.

     Our labor force is primarily represented by the American Postal Workers Union, the National Association of Letter Carriers, the National Postal Mail Handlers Union and the National Rural Letter Carriers Association. Approximately 90% of our career employees are covered by collective bargaining agreements.

     As an independent entity of the executive branch, we participate in federal employee benefit programs covering retirement, heath benefits and workers' compensation.