To the President, members of Congress, postal employees and the American people:

     It was a great year for the Postal Service.

     We set records in service, productivity and customer and employee satisfaction.

     We accomplished transformation breakthroughs by using technology to improve efficiency, increase customer convenience and enhance products and services.

     We joined our customers and representatives from the mailing industry in supporting legislation that adjusts our payments to the Civil Service Retirement System.

     We worked with the President's Commission on the United States Postal Service to preserve the viability of the nation's postal system well into the new century.

     We managed for results. And we achieved them by staying focused on three key strategies: improving operational efficiency, adding value for our customers, and enhancing our performance-based culture.

     We identified each of these strategies in our Transformation Plan. The Plan is our response to the challenges of an intensely competitive delivery market, the emergence of new communication technologies, and a business model defined by a statute written for a different time. The Postal Service must continue to change to meet the needs of a changing nation. The Transformation Plan will help us do that.

     We appreciate the help of others, as well. An analysis by the Office of Personnel Management found that, without a change in our payment schedule, the Postal Service would overpay its obligation to the Civil Service Retirement System by $105 billion. Quick action by Congress and the Administration resulted in legislation to avoid this overpayment.

     The savings available through the new law helped us reduce outstanding debt by more than one third, from $11.1 billion to $7.3 billion, and make it possible for us to continue reducing debt in 2004 and hold postage rates steady until at least 2006.

     We closed the year with a net income of $3.9 billion, reflecting both our success in managing costs and improving efficiency and the positive effects of the Civil Service Retirement System funding reform legislation.

     We will continue to do everything possible to protect the basic right of affordable, universal mail service for everyone in America. Yet we must face the simple fact that our business model — established by the 1970 Postal Reorganization Act — is no longer valid. We can no longer expect that the costs of serving a continually expanding delivery base will be offset by increasing revenue from continued mail volume growth.

     To address these issues, the President appointed a Commission to recommend the legislative and administrative steps necessary to ensure the viability of the nation's postal system. The Commission, acknowledging the important role of our Transformation Plan in helping us meet today's challenges, also offered recommendations for change in four key areas: the Postal Service business model, private-sector partnerships, technology and workforce.

     The Commission brought informed proposals to the critical consideration of the future of our nation's mail service. The Postal Service will remain engaged in that discussion. But we will not let it distract us from our mission of providing affordable, universal mail service for all customers and all communities. That is our job. That is what we will continue to do.