8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  December 21, 2005

FEDEX CORPORATION

(Exact name of registrant as specified in its charter)

Commission file number 1-15829

Delaware	62-1721435
(State or other jurisdiction of	(I.R.S. Employer
incorporation)	Identification No.)
942 South Shady Grove Road, Memphis, Tennessee	38120
(Address of principal executive offices)	(ZIP Code)

Registrant’s telephone number, including area code:  (901) 818-7500

FEDERAL EXPRESS CORPORATION

(Exact name of registrant as specified in its charter)

Commission file number 1-7806

Delaware	71-0427007
(State or other jurisdiction of	(I.R.S. Employer
incorporation)	Identification No.)
3610 Hacks Cross Road, Memphis, Tennessee	38125
(Address of principal executive offices)	(ZIP Code)

Registrant’s telephone number, including area code:  (901) 369-3600

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

EXPLANATORY NOTE

The information in this Report, including the exhibit, is being furnished pursuant to Item 2.02 of Form 8-K and General Instruction B.2 thereunder.  Such information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.

SECTION 2.  FINANCIAL INFORMATION.

Item 2.02.  Results of Operations and Financial Condition.

Attached as Exhibit 99.1 and incorporated herein by reference is a copy of FedEx Corporation’s press release, dated December 21, 2005, announcing its and its wholly owned subsidiary Federal Express Corporation’s financial results for the fiscal quarter ended November 30, 2005.

SECTION 9.  FINANCIAL STATEMENTS AND EXHIBITS.

Item 9.01.  Financial Statements and Exhibits.

(d)Exhibits.  The following exhibit is being furnished as part of this Report.

Exhibit
Number	Description
99.1	Press Release of FedEx Corporation dated December 21, 2005.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned hereunto duly authorized.

	FedEx Corporation
Date: December 21, 2005	By:	/s/ MARSHALL W. WITT
		Marshall W. Witt
		Staff Vice President and
		Corporate Controller
	Federal Express Corporation
Date: December 21, 2005	By:	/s/ JAY L. COFIELD
		Jay L. Cofield
		Vice President and
		Worldwide Controller

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EXHIBIT INDEX

Exhibit
Number	Description
99.1	Press Release of FedEx Corporation dated December 21, 2005.

E-1

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

FedEx Net Income Surges 33 Percent;

Annual Earnings Outlook Raised

MEMPHIS, Tenn., December 21, 2005 ... FedEx Corporation (NYSE: FDX) today reported earnings of $1.53 per diluted share for the second quarter ended November 30, compared to $1.15 per diluted share a year ago, an increase of 33%.

FedEx Corp. reported the following consolidated results for the second quarter:

•Revenue of $8.09 billion, up 10% from $7.33 billion the previous year

•Operating income of $790 million, up 32% from $600 million a year ago

•Operating margin of 9.8%, up from last year’s 8.2%

•Net income of $471 million, up 33% from $354 million the previous year

“Customer demand for our broad portfolio of transportation services, a disciplined pricing approach by FedEx and strong productivity gains led to a sharp improvement in our operating margins,” said Frederick W. Smith, chairman, president and chief executive officer.  “FedEx is also benefiting from solid economic growth year over year in the U.S. and Asian economies, which we expect to continue in 2006.”

Last year’s second quarter included two one-time items which negatively affected earnings by a net $0.06 per share:  A one-time charge of $48 million or $0.10 per diluted share related to the company’s claim for compensation under the Air Transportation Safety and System Stabilization Act, partially offset by a $0.04 per diluted share tax benefit resulting from the passage of the American Jobs Creation Act of 2004.

Total combined average daily package volume at FedEx Express and FedEx Ground grew 3% year over year for the quarter, led by improved international express package growth.  Yield management actions in U.S. deferred services at FedEx Express to improve profitability boosted yields while resulting in lower volume.  FedEx Ground

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volumes were weaker than expected, but strengthened in the last two weeks of November and continue to strengthen in December.  The higher FedEx Ground growth trend is expected to continue in the second half of the fiscal year.

Outlook

FedEx expects third quarter earnings to be $1.15 to $1.30 per diluted share.  The company increased its earnings guidance for the year to $5.45 to $5.70 per diluted share from its previous guidance of $5.25 to $5.50 per diluted share, which includes the net effect of a $0.15 per share lease accounting charge in the first quarter.  Excluding the impact of the lease accounting charge, earnings for the year are expected to be $5.60 to $5.85 per diluted share.  The capital spending forecast for fiscal 2006 remains approximately $2.5 billion.

“We exceeded our original forecast for the second quarter due to outstanding operational performance and the deferral of certain advertising and promotional expenses to the second half of the fiscal year,” said Alan B. Graf, Jr., executive vice president and chief financial officer.  “Our increased earnings guidance for the full year reflects confidence in our ability to continue executing our business strategy, manage our cost structure and leverage sustained economic growth.”

FedEx Express Segment

For the second quarter, the FedEx Express segment reported:

•Revenue of $5.37 billion, up 11% from last year’s $4.83 billion

•Operating income of $476 million, up 43% from $333 million a year ago

•Operating margin of 8.9%, up from 6.9% the previous year

FedEx International Priority (IP) revenue grew 14% for the quarter.  IP average daily package volume grew 8%, due to strong growth in Asia and Europe and continuing growth in U.S. export.  IP revenue per package grew 5%, primarily due to higher fuel surcharges.  U.S. domestic express package revenue increased 8%, as U.S. domestic revenue per package increased 7% and U.S. domestic volume increased 1%.  The increase in U.S. domestic revenue per package was mainly driven by higher fuel surcharges and an increase in average rate per pound.

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FedEx Express operating margin improved significantly year over year, benefiting from solid growth in IP revenue and significant improvement in productivity.  Also, last year’s operating margin was negatively affected by the one-time charge related to the company’s claim for compensation under the Air Transportation Safety and System Stabilization Act.

FedEx Ground Segment

For the second quarter, the FedEx Ground segment reported:

•Revenue of $1.31 billion, up 11% from last year’s $1.17 billion

•Operating income of $163 million, up 21% from $135 million a year ago

•Operating margin of 12.5%, up from 11.5% the previous year

FedEx Ground average daily package volume grew 4% year over year in the second quarter.  Yield improved 6% primarily due to the reintroduction of a fuel surcharge, higher extra service revenue and the impact of the January 2005 general rate increase.

The operating margin improvement resulted from higher yields, improved field productivity and stringent expense controls at FedEx Ground, offset in part by investments in new technology and the company’s capacity expansion program.  Additionally, in the previous year’s second quarter FedEx Supply Chain Services recorded a $10 million charge for the termination of a vendor agreement.

FedEx Freight Segment

For the second quarter, the FedEx Freight segment reported:

•Revenue of $932 million, up 14% from last year’s $820 million

•Operating income of $135 million, up 32% from $102 million a year ago

•Operating margin of 14.5%, up from 12.5% the previous year

Less-than-truckload (LTL) yield improved 8% year over year, reflecting incremental fuel surcharges and higher rates.  Average daily LTL shipments increased 5% year over year.  The growth in yield and shipments, combined with system productivity gains, led to an increase in operating margin.

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LTL shipment growth is benefiting from increasing demand for features such as FedEx Freight Advance Notice, launched in September 2005, and the company’s no-fee money-back guarantee.  These features enhance FedEx Freight’s leadership position in the regional LTL market and further differentiate it from the competition by providing certainty, reliability and unprecedented shipment information.

FedEx Kinko’s Segment

For the second quarter, the FedEx Kinko’s segment reported:

•Revenue of $528 million, up 1% from last year’s $524 million

•Operating income of $16 million, down 45% from $29 million a year ago

•Operating margin of 3.0%, down from 5.7% the previous year

The FedEx Kinko’s revenue increase for the quarter was due to continued growth from package acceptance revenues and the benefit of the conversion of certain FedEx World Service Centers to FedEx Kinko’s Ship Centers.  This growth was mostly offset by a decline in copy revenues, due in part to a competitive pricing environment.

Operating margin was negatively affected by the decline in copy product line revenues and costs associated with internal technology enhancements and product offering initiatives.

Corporate Overview

FedEx Corp. (NYSE: FDX) provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services.  With annual revenues of $31 billion, the company offers integrated business applications through operating companies competing collectively and managed collaboratively, under the respected FedEx brands.  Consistently ranked among the world’s most admired and trusted employers, FedEx inspires its more than 260,000 employees and contractors to remain “absolutely, positively” focused on safety, the highest ethical and professional standards and the needs of their customers and communities. For more information, visit fedex.com.

For free B-roll/video content about FedEx please log onto www.thenewsmarket.com/fedex to preview and request video. You can receive broadcast-standard video digitally or by tape from this site. Registration and video is free to the media.

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Additional information and operating data are contained in the company’s annual report, Form 10-K, Form 10-Qs and second quarter FY2006 Statistical Book.  These materials, as well as a Webcast of the earnings release conference call to be held at 8:30 a.m. EST on December 21, are available on the company’s Web site at www.fedex.com/us/investorrelations.  A replay of the conference call Webcast will be posted on our Web site following the call.

Certain statements in this press release may be considered forward-looking statements, such as statements relating to management’s views with respect to future events and financial performance.  Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from historical experience or from future results expressed or implied by such forward-looking statements.  Potential risks and uncertainties include, but are not limited to, economic conditions in the global markets in which we operate, the effect of adverse weather on our operations, new U.S. domestic or international government regulation, the impact from any terrorist activities or international conflicts, our ability to effectively operate, integrate and leverage the FedEx Kinko’s business, the impact of changes in fuel prices and currency exchange rates, our ability to match capacity to shifting volume levels and other factors which can be found in FedEx Corp.’s and its subsidiaries’ press releases and filings with the SEC.

Media Contact:  Jess Bunn 901-818-7463

Investor Contact:  Jim Clippard 901-818-7468

Home Page:  fedex.com

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURE

TO GAAP FINANCIAL MEASURE

The company believes that meaningful analysis of our financial performance requires an understanding of the factors underlying that performance and our judgments about the likelihood that particular factors will repeat.  Excluding the impact of the one-time, non-cash lease accounting charge from our full year guidance will allow more accurate comparisons to prior periods of our expected operating performance in fiscal 2006.  As required by SEC rules, the table below presents a reconciliation of our presented non-GAAP measure to the most directly comparable GAAP measure.

	FY 2006 Diluted EPS Guidance
Non-GAAP Measure	$5.60 to $5.85
First Quarter Lease Accounting Charge, Net of Variable Compensation and Income Taxes	(0.15)
GAAP Measure	$5.45 to $5.70

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FEDEX CORP. FINANCIAL HIGHLIGHTS

Second Quarter Fiscal 2006

(In millions, except earnings per share and FTEs)

(Unaudited)

	Three Months Ended								Six Months Ended
	November 30								November 30
	2005			2004			%		2005			2004			%
Revenue:
FedEx Express segment	$	5,370		$	4,834		11	%	$	10,492		$	9,450		11	%
FedEx Ground segment	1,307			1,174			11	%	2,526			2,247			12	%
FedEx Freight segment	932			820			14	%	1,824			1,627			12	%
FedEx Kinko’s segment	528			524			1	%	1,045			1,014			3	%
Other & eliminations	(47		)	(18		)	NM		(90		)	(29		)	NM
Total Revenue	8,090			7,334			10	%	15,797			14,309			10	%
Operating Expenses:
Salaries and employee benefits	3,081			2,930			5	%	6,143			5,850			5	%
Purchased transportation	812			747			9	%	1,583			1,428			11	%
Rentals and landing fees	584			577			1	%	1,249			1,128			11	%
Depreciation and amortization	386			363			6	%	756			723			5	%
Fuel	891			592			51	%	1,619			1,075			51	%
Maintenance and repairs	445			422			5	%	913			850			7	%
Airline Stabilization Act charge	—			48			NM		—			48			NM
Other	1,101			1,055			4	%	2,160			2,028			7	%
Total Operating Expenses	7,300			6,734			8	%	14,423			13,130			10	%
Operating Income:
FedEx Express segment	476			333			43	%	761			643			18	%
FedEx Ground segment	163			135			21	%	311			282			10	%
FedEx Freight segment	135			102			32	%	270			205			32	%
FedEx Kinko’s segment	16			29			(45	)%	32			48			(33	)%
Other & eliminations	—			1			NM		—			1			NM
Total Operating Income	790			600			32	%	1,374			1,179			17	%
Other Income (Expense):
Interest, net	(30		)	(38		)	(21	)%	(54		)	(77		)	(30	)%
Other, net	—			(8		)	NM		(11		)	(14		)	(21	)%
Total Other Income (Expense)	(30		)	(46		)	(35	)%	(65		)	(91		)	(29	)%
Pretax Income	760			554			37	%	1,309			1,088			20	%
Provision for Income Taxes	289			200			45	%	499			404			24	%
Net Income	$	471		$	354		33	%	$	810		$	684		18	%
Diluted Earnings Per Share	$	1.53		$	1.15		33	%	$	2.63		$	2.23		18	%
Weighted Average Common and Common Equivalent Shares	308			307			0	%	308			306			1	%
Capital Expenditures	$	655		$	781		(16	)%	$	1,326		$	1,175		13	%
Average Full-Time Equivalents (FTEs in thousands)	222			216			3	%	220			214			3	%

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FEDEX CORP. CONDENSED CONSOLIDATED BALANCE SHEETS

Second Quarter Fiscal 2006

(In millions)

	Nov. 30, 2005
	(Unaudited)		May 31, 2005
ASSETS
Current Assets:
Cash and cash equivalents	$	786	$	1,039
Other current assets	4,506		4,230
Total Current Assets	5,292		5,269
Net Property and Equipment	10,275		9,643
Other Long-Term Assets	5,644		5,492
	$	21,211	$	20,404
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current Liabilities:
Current portion of long-term debt	$	493	$	369
Other current liabilities	4,298		4,365
Total Current Liabilities	4,791		4,734
Long-Term Debt, Less Current Portion	2,203		2,427
Other Long-Term Liabilities	3,809		3,655
Total Common Stockholders’ Investment	10,408		9,588
	$	21,211	$	20,404

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FEDEX CORP. CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS

Second Quarter Fiscal 2006

(In millions)

(Unaudited)

	Six Months Ended
	November 30
	2005			2004
Operating Activities:
Net income	$	810		$	684
Noncash charges (credits):
Depreciation and amortization	754			723
Other, net	200			(7		)
Changes in operating assets and liabilities, net	(629		)	(161		)
Net cash provided by operating activities	1,135			1,239
Investing Activities:
Capital expenditures	(1,326		)	(1,175		)
Business acquisition	—			(122		)
Proceeds from asset dispositions	37			5
Net cash used in investing activities	(1,289		)	(1,292		)
Financing Activities:
Dividends paid	(48		)	(42		)
Other, net	(51		)	(12		)
Net cash used in financing activities	(99		)	(54		)
Net decrease in cash and cash equivalents	(253		)	(107		)
Cash and cash equivalents at beginning of period	1,039			1,046
Cash and cash equivalents at end of period	$	786		$	939

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FEDEX EXPRESS SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS

Second Quarter Fiscal 2006

(Dollars in millions)

(Unaudited)

	Three Months Ended								Six Months Ended
	November 30								November 30
	2005			2004			%		2005			2004			%
FINANCIAL HIGHLIGHTS
Revenue	$	5,370		$	4,834		11	%	$	10,492		$	9,450		11	%
Operating Expenses:
Salaries and employee benefits	1,959			1,873			5	%	3,930			3,762			4	%
Purchased transportation	236			206			15	%	477			397			20	%
Rentals and landing fees	409			399			3	%	892			782			14	%
Depreciation and amortization	203			199			2	%	396			399			(1	)%
Fuel	760			513			48	%	1,388			935			48	%
Maintenance and repairs	339			322			5	%	700			647			8	%
Airline Stabilization Act charge	—			48			NM		—			48			NM
Intercompany charges	383			374			2	%	741			736			1	%
Other	605			567			7	%	1,207			1,101			10	%
Total Operating Expenses	4,894			4,501			9	%	9,731			8,807			10	%
Operating Income	$	476		$	333		43	%	$	761		$	643		18	%
Operating Margin	8.9		%	6.9		%			7.3		%	6.8		%
OPERATING STATISTICS
Operating Weekdays	63			63			—		128			128			—
AVG DAILY VOLUME / POUNDS
Average Daily Package Volume (000s):
U.S. Overnight Box	1,211			1,179			3	%	1,195			1,164			3	%
U.S. Overnight Envelope	702			663			6	%	707			663			7	%
U.S. Deferred	886			941			(6	)%	891			901			(1	)%
Total U.S. Domestic Package	2,799			2,783			1	%	2,793			2,728			2	%
International Priority	480			443			8	%	462			430			7	%
Total Average Daily Packages	3,279			3,226			2	%	3,255			3,158			3	%
Average Daily Freight Pounds (000s):
U.S.	9,544			9,008			6	%	9,209			8,605			7	%
International	2,283			1,874			22	%	2,159			1,867			16	%
Total Avg Daily Freight Pounds	11,827			10,882			9	%	11,368			10,472			9	%
YIELD
Revenue Per Package:
U.S. Overnight Box	$	21.03		$	19.81		6	%	$	20.69		$	19.59		6	%
U.S. Overnight Envelope	10.86			10.33			5	%	10.71			10.27			4	%
U.S. Deferred	12.56			11.51			9	%	12.16			11.54			5	%
Total U.S. Domestic Package	15.80			14.74			7	%	15.44			14.67			5	%
International Priority	58.14			55.13			5	%	57.36			54.04			6	%
Composite Package Yield	$	21.99		$	20.28		8	%	$	21.39		$	20.03		7	%
Revenue Per Freight Pound:
U.S.	$	0.94		$	0.83		13	%	$	0.91		$	0.81		12	%
International	0.81			0.77			5	%	0.80			0.76			5	%
Composite Freight Yield	$	0.91		$	0.82		11	%	$	0.89		$	0.80		11	%
Average Full-Time Equivalents (000s)	124			122			2	%	125			122			2	%

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FEDEX GROUND SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS

Second Quarter Fiscal 2006

(Dollars in millions)

(Unaudited)

	Three Months Ended								Six Months Ended
	November 30								November 30
	2005			2004			%		2005			2004			%
FINANCIAL HIGHLIGHTS
Revenue	$	1,307		$	1,174		11	%	$	2,526		$	2,247		12	%
Operating Expenses:
Salaries and employee benefits	230			213			8	%	451			410			10	%
Purchased transportation	506			456			11	%	972			866			12	%
Rentals	36			32			13	%	67			58			16	%
Depreciation and amortization	53			43			23	%	103			83			24	%
Fuel	27			13			108	%	45			20			125	%
Maintenance and repairs	28			26			8	%	57			52			10	%
Intercompany charges	129			119			8	%	249			234			6	%
Other	135			137			(1	)%	271			242			12	%
Total Operating Expenses	1,144			1,039			10	%	2,215			1,965			13	%
Operating Income	$	163		$	135		21	%	$	311		$	282		10	%
Operating Margin	12.5		%	11.5		%			12.3		%	12.6		%
OPERATING STATISTICS
Operating Weekdays	63			63			—		128			128			—
Average Daily Package Volume(1) (000s)	2,843			2,725			4	%	2,712			2,584			5	%
Yield (Revenue Per Package)(1)	$	6.90		$	6.48		6	%	$	6.91		$	6.51		6	%

(1) - Package statistics exclude FedEx SmartPost.

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FEDEX FREIGHT SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS

Second Quarter Fiscal 2006

(Dollars in millions)

(Unaudited)

	Three Months Ended								Six Months Ended
	November 30								November 30
	2005			2004			%		2005			2004			%
FINANCIAL HIGHLIGHTS
Revenue	$	932		$	820		14	%	$	1,824		$	1,627		12	%
Operating Expenses:
Salaries and employee benefits	442			406			9	%	881			816			8	%
Purchased transportation	81			88			(8	)%	153			172			(11	)%
Rentals and landing fees	25			26			(4	)%	49			51			(4	)%
Depreciation and amortization	29			26			12	%	59			50			18	%
Fuel	104			65			60	%	186			119			56	%
Maintenance and repairs	30			31			(3	)%	58			62			(6	)%
Intercompany charges	9			7			29	%	18			13			38	%
Other	77			69			12	%	150			139			8	%
Total Operating Expenses	797			718			11	%	1,554			1,422			9	%
Operating Income	$	135		$	102		32	%	$	270		$	205		32	%
Operating Margin	14.5		%	12.5		%			14.8		%	12.6		%
OPERATING STATISTICS
LTL Operating Weekdays	62			62			—		127			127			—
LTL Shipments Per Day (000s)	68			65			5	%	67			65			3	%
Weight Per LTL Shipment (lbs)	1,161			1,130			3	%	1,147			1,129			2	%
LTL Revenue/CWT	$	16.80		$	15.55		8	%	$	16.68		$	15.26		9	%

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FEDEX KINKO’S SEGMENT FINANCIAL HIGHLIGHTS

Second Quarter Fiscal 2006

(Dollars in millions)

(Unaudited)

	Three Months Ended								Six Months Ended
	November 30								November 30
	2005			2004			%		2005			2004			%
FINANCIAL HIGHLIGHTS
Revenue	$	528		$	524		1	%	$	1,045		$	1,014		3	%
Operating Expenses:
Salaries and employee benefits	190			186			2	%	376			368			2	%
Rentals	99			107			(7	)%	201			209			(4	)%
Depreciation and amortization	37			32			16	%	73			64			14	%
Maintenance and repairs	19			17			12	%	37			34			9	%
Intercompany charges	6			3			100	%	10			6			67	%
Other operating expenses:
Supplies, including paper and toner	70			71			(1	)%	137			136			1	%
Other	91			79			15	%	179			149			20	%
Total Operating Expenses	512			495			3	%	1,013			966			5	%
Operating Income	$	16		$	29		(45	)%	$	32		$	48		(33	)%
Operating Margin	3.0		%	5.7		%			3.1		%	4.8		%

Note: Certain prior period amounts have been reclassified to conform to the current period’s presentation.

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