Capital cash outlays are the funds we invest for such capital improvements as facilities, automation equipment and information technology.

     The Cash Flow/Capital Expenditure (CAPEX) ratio shows the relationship between these main drivers of our debt balance. CAPEX is computed by dividing cash flow from operations by capital cash outlays. The charts illustrate the direct relationship between the CAPEX ratio and borrowing. Whenever our capital outlays appreciably exceed our cash flow, we must make up the difference by either reducing cash on hand or by borrowing, or some combination of the two.

	Cash Flow from Operations ($ millions)	Capital Cash Outlays ($ millions)	CAPEX Ratio
2003	$6,405	$1,277	501.6
2002	1,443	1,675	86.1
2001	1,255	2,932	42.8
2000	1,207	3,254	37.1
1999	2,863	3,788	75.6

     ... and debt changes proportionately.

	Change in Debt ($ millions)
2003	$(3,841)
2002	(200)
2001	1,999
2000	2,399
1999	496

Capital Investments

The Board of Governors approves the capital budget each year. The Board also approves all major capital projects, generally defined as projects greater than $10 million. At the beginning of the year, there were 50 Board-approved projects in progress representing $5.7 billion. During the year, the Board approved 17 new projects for $2.2 billion and 17 projects were completed, representing $811 million.

     While the funding for a project is authorized in one year, the commitment, or contract to purchase or build, may occur over several years. Similarly, actual payment for the project, or capital cash outlays, may take place over several years. The $1.277 billion in capital outlays for 2003 represents outlays for commitments made in previous years as well as commitments made in 2003 for all 59 projects.

     Of the 49 active Board-approved projects at the close of the year, 25 were for mail processing equipment and vehicles, 9 were for facilities and 15 were for other projects such as retail equipment and information infrastructure support.

     We estimate the total capital commitment plan for 2004 at $3.2 billion, with estimated cash outlays of $2.2 billion, of which approximately $1.5 billion is for commitments made in prior years and the remaining $700 million is for new commitments in 2004.