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):  March 22, 2006

FEDEX CORPORATION

(Exact name of registrant as specified in its charter)

Commission file number 1-15829

Delaware	62-1721435
(State or other jurisdiction of incorporation)	(I.R.S. Employer 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 incorporation)	(I.R.S. Employer 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 March 22, 2006, announcing its and its wholly owned subsidiary Federal Express Corporation’s financial results for the fiscal quarter ended February 28, 2006.

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 March 22, 2006.

2

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: March 22, 2006	By:	/s/ MARSHALL W. WITT
		Marshall W. Witt
		Staff Vice President and
		Corporate Controller
	Federal Express Corporation
Date: March 22, 2006	By:	/s/ JAY L. COFIELD
		Jay L. Cofield
		Vice President and
		Worldwide Controller

3

EXHIBIT INDEX

Exhibit Number	Description
99.1	Press Release of FedEx Corporation dated March 22, 2006.

E-1

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

FedEx Reports Strong Revenue and Earnings Growth

Operating Margins Improve Across All Transportation Segments

MEMPHIS, Tenn., March 22, 2006 ... FedEx Corporation (NYSE: FDX) today reported earnings of $1.38 per diluted share for the third quarter ended February 28, compared to $1.03 per diluted share a year ago, a year-over-year increase of 34%.

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

•Revenue of $8.00 billion, up 9% from $7.34 billion the previous year

•Operating income of $713 million, up 29% from $552 million a year ago

•Operating margin of 8.9%, up from last year’s 7.5%

•Net income of $428 million, up 35% from $317 million the previous year

“FedEx continues to deliver strong results by providing outstanding customer service around the world and by crisply executing our strategy of balancing volume and revenue growth with cost containment to improve our margins,” said Frederick W. Smith, chairman, president and chief executive officer of FedEx Corp.  “With our broad portfolio of services, FedEx is uniquely positioned to take advantage of continued growth in the global economy.”

Total combined average daily package volume at FedEx Ground and FedEx Express grew 4% year over year for the quarter, led by improved ground and international express package growth. Yield management remains a top priority across all transportation services. During the quarter, continued yield management actions in FedEx Express U.S. deferred services boosted yields while resulting in lower U.S. deferred express volume.

FedEx ranked second in FORTUNE magazine’s most recent “America’s Most Admired Companies” list and fourth in its “World’s Most Admired Companies” list. FedEx continues to place in the FORTUNE “100 Best Companies to Work For” list and has the largest employee base on that list.

1

Outlook

FedEx expects fourth quarter earnings to be $1.65 to $1.80 per diluted share. The company’s earnings guidance for the year is now $5.66 to $5.81 per diluted share compared to previous guidance of $5.45 to $5.70 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 $5.81 to $5.96 per diluted share. The capital spending forecast for fiscal 2006 is $2.6 billion.

“Earnings for our third quarter were better than forecasted due to a stronger than expected holiday peak season for FedEx Ground, improved productivity in our transportation segments, lower than expected fuel costs, deferral of advertising and promotion costs to the fourth quarter and a lower effective tax rate,” said Alan B. Graf, Jr., executive vice president and chief financial officer. “Our earnings guidance for the fourth quarter, which assumes continued economic growth, reflects a more normal expense trend.”

FedEx Express Segment

For the third quarter, the FedEx Express segment reported:

•Revenue of $5.34 billion, up 9% from last year’s $4.92 billion

•Operating income of $446 million, up 31% from $340 million a year ago

•Operating margin of 8.4%, up from 6.9% the previous year

FedEx Express operating margin improved significantly year over year, benefiting from solid growth in FedEx International Priority (IP) and U.S. Overnight revenue, continuing yield management actions and improved productivity.

FedEx IP revenue grew 12% for the quarter. IP average daily package volume grew 10%, due to strong growth in Asia and Europe and continuing growth in U.S. export. IP revenue per package grew 2% due to higher fuel surcharges and improved regional mix, partially offset by currency exchange rate impacts. U.S. domestic revenue per package increased 8%, while U.S. domestic volume was down 3% resulting from yield management actions in lower-yielding U.S. deferred services. The increase in U.S. domestic revenue per package was mainly driven by higher fuel surcharges, the January 2006 price increases and yield management actions.

2

FedEx Express will begin utilizing three new flight frequencies into China later this month. This will provide the company a total of 26 weekly flights to China, the most of any U.S.-based cargo carrier.

On January 24, 2006, FedEx Express entered into an agreement with Tianjin Datian W. Group Co., Ltd. (“DTW Group”) to acquire DTW Group’s fifty percent share of the FedEx-DTW International Priority express joint venture and DTW Group’s domestic express network in China for approximately $400 million in cash. This acquisition will convert the company’s joint venture with DTW Group, formed in 1999, into a wholly owned subsidiary and increase our presence in China in the international and domestic express businesses. The acquisition is expected to be completed in the first half of fiscal 2007.

FedEx Ground Segment

For the third quarter, the FedEx Ground segment reported:

•Revenue of $1.36 billion, up 14% from last year’s $1.20 billion

•Operating income of $187 million, up 26% from $149 million a year ago

•Operating margin of 13.7%, up from 12.4% the previous year

FedEx Ground average daily package volume grew 11% year over year in the third quarter. Yield improved 5% primarily due to the January 2006 general rate increase, increased fuel surcharges and higher extra services revenue.

Operating margin improved due to revenue growth, higher productivity and effective cost controls, offset in part by investments in new technology and the company’s capacity expansion program. There was one fewer operating day in this year’s third quarter.

FedEx Freight Segment

For the third quarter, the FedEx Freight segment reported:

•Revenue of $848 million, up 14% from last year’s $747 million

•Operating income of $73 million, up 35% from $54 million a year ago

•Operating margin of 8.6%, up from 7.2% the previous year

3

Less-than-truckload (LTL) daily shipments increased 7% year over year due to greater demand for FedEx Freight’s regional and interregional services.  Yield improved 7% year over year reflecting incremental fuel surcharges and higher rates. Operating margin improved during the quarter due to growth in LTL revenue combined with productivity gains.

FedEx Kinko’s Segment

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

•Revenue of $501 million, up slightly from last year’s $499 million

•Operating income of $7 million, down 36% from $11 million a year ago

•Operating margin of 1.4%, down from 2.2% the previous year

FedEx Kinko’s revenue for the quarter increased slightly, driven by continued growth from package acceptance revenues and the year over year benefit from the conversion of certain FedEx World Service Centers to FedEx Kinko’s Ship Centers in April 2005. This growth was offset by a decline in copy product line revenues, due in part to a competitive pricing environment.

Operating margin was negatively affected by the decline in copy revenues and increases in costs associated with technology and product offering initiatives. Increased package acceptance revenues and declines in copy product line revenues are expected to continue in the fourth quarter, as are increased costs to enhance service levels and implement new technologies.

During the third quarter, FedEx veteran Kenneth A. May was named president and chief executive officer of FedEx Kinko’s and Brian D. Philips, formerly vice president of U.S. marketing for FedEx, succeeded May as executive vice president and chief operating officer.

4

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 $32 billion, the company offers integrated business applications through operating companies competing collectively and managed collaboratively, under the respected FedEx brand. 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.

Additional information and operating data are contained in the company’s annual report, Form 10-K, Form 10-Qs and third 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 March 22 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, 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

5

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	$5.81 to $5.96
First Quarter Lease Accounting Charge, Net of Variable Compensation and Income Taxes	(0.15)
GAAP Measure	$5.66 to $5.81

6

FEDEX CORP. FINANCIAL HIGHLIGHTS

Third Quarter Fiscal 2006

(In millions, except earnings per share and FTEs)

(Unaudited)

	Three Months Ended February 28								Nine Months Ended February 28
	2006			2005			%		2006			2005			%
Revenue:
FedEx Express segment	$	5,340		$	4,915		9	%	$	15,832		$	14,365		10	%
FedEx Ground segment	1,363			1,200			14	%	3,889			3,447			13	%
FedEx Freight segment	848			747			14	%	2,672			2,374			13	%
FedEx Kinko’s segment	501			499			0	%	1,546			1,513			2	%
Other & eliminations	(49		)	(22		)	NM		(139		)	(51		)	NM
Total Revenue	8,003			7,339			9	%	23,800			21,648			10	%
Operating Expenses:
Salaries and employee benefits	3,162			3,026			4	%	9,305			8,876			5	%
Purchased transportation	814			748			9	%	2,397			2,176			10	%
Rentals and landing fees	577			585			(1	)%	1,826			1,713			7	%
Depreciation and amortization	391			368			6	%	1,147			1,091			5	%
Fuel	774			570			36	%	2,393			1,645			45	%
Maintenance and repairs	427			413			3	%	1,340			1,263			6	%
Airline Stabilization Act charge	—			—			NM		—			48			NM
Other	1,145			1,077			6	%	3,305			3,105			6	%
Total Operating Expenses	7,290			6,787			7	%	21,713			19,917			9	%
Operating Income:
FedEx Express segment	446			340			31	%	1,207			983			23	%
FedEx Ground segment	187			149			26	%	498			431			16	%
FedEx Freight segment	73			54			35	%	343			259			32	%
FedEx Kinko’s segment	7			11			(36	)%	39			59			(34	)%
Other & eliminations	—			(2		)	NM		—			(1		)	NM
Total Operating Income	713			552			29	%	2,087			1,731			21	%
Other Income (Expense):
Interest, net	(28		)	(34		)	(18	)%	(82		)	(111		)	(26	)%
Other, net	(2		)	(4		)	(50	)%	(13		)	(18		)	(28	)%
Total Other Income (Expense)	(30		)	(38		)	(21	)%	(95		)	(129		)	(26	)%
Pretax Income	683			514			33	%	1,992			1,602			24	%
Provision for Income Taxes	255			197			29	%	754			601			25	%
Net Income	$	428		$	317		35	%	$	1,238		$	1,001		24	%
Diluted Earnings Per Share	$	1.38		$	1.03		34	%	$	4.01		$	3.26		23	%
Weighted Average Common and Common Equivalent Shares	310			308			1	%	309			307			1	%
Capital Expenditures	$	530		$	486		9	%	$	1,856		$	1,661		12	%
Average Full-Time Equivalents (FTEs in thousands)	223			219			2	%	221			215			3	%

7

FEDEX CORP. CONDENSED CONSOLIDATED BALANCE SHEETS

Third Quarter Fiscal 2006

(In millions)

	Feb. 28, 2006		May 31, 2005
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	1,121	$	1,039
Other current assets	4,393		4,230
Total Current Assets	5,514		5,269
Net Property and Equipment	10,423		9,643
Other Long-Term Assets	5,602		5,492
	$	21,539	$	20,404
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current Liabilities:
Current portion of long-term debt	$	241	$	369
Other current liabilities	4,270		4,365
Total Current Liabilities	4,511		4,734
Long-Term Debt, Less Current Portion	2,209		2,427
Other Long-Term Liabilities	3,895		3,655
Total Common Stockholders’ Investment	10,924		9,588
	$	21,539	$	20,404

8

FEDEX CORP. CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS

Third Quarter Fiscal 2006

(In millions)

(Unaudited)

	Nine Months Ended February 28
	2006			2005
Operating Activities:
Net income	$	1,238		$	1,001
Noncash charges:
Depreciation and amortization	1,145			1,091
Other, net	243			29
Changes in operating assets and liabilities, net	(407		)	(161		)
Net cash provided by operating activities	2,219			1,960
Investing Activities:
Capital expenditures	(1,856		)	(1,661		)
Business acquisition	—			(122		)
Proceeds from asset dispositions	44			10
Net cash used in investing activities	(1,812		)	(1,773		)
Financing Activities:
Dividends paid	(73		)	(63		)
Other, net	(252		)	(86		)
Net cash used in financing activities	(325		)	(149		)
Net increase in cash and cash equivalents	82			38
Cash and cash equivalents at beginning of period	1,039			1,046
Cash and cash equivalents at end of period	$	1,121		$	1,084

9

FEDEX EXPRESS SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS

Third Quarter Fiscal 2006

(Dollars in millions)

(Unaudited)

	Three Months Ended February 28								Nine Months Ended February 28
	2006			2005			%		2006			2005			%
FINANCIAL HIGHLIGHTS
Revenue	$	5,340		$	4,915		9	%	$	15,832		$	14,365		10	%
Operating Expenses:
Salaries and employee benefits	2,019			1,961			3	%	5,949			5,723			4	%
Purchased transportation	238			216			10	%	715			613			17	%
Rentals and landing fees	408			411			(1	)%	1,300			1,193			9	%
Depreciation and amortization	203			199			2	%	599			598			0	%
Fuel	666			498			34	%	2,054			1,433			43	%
Maintenance and repairs	320			307			4	%	1,020			954			7	%
Airline Stabilization Act charge	—			—			NM		—			48			NM
Intercompany charges	386			382			1	%	1,127			1,118			1	%
Other	654			601			9	%	1,861			1,702			9	%
Total Operating Expenses	4,894			4,575			7	%	14,625			13,382			9	%
Operating Income	$	446		$	340		31	%	$	1,207		$	983		23	%
Operating Margin	8.4		%	6.9		%	1.5	pts	7.6		%	6.8		%	0.8	pts
OPERATING STATISTICS
Operating Weekdays	62			62			—		190			190			—
AVG DAILY VOLUME / POUNDS
Average Daily Package Volume (000s):
U.S. Overnight Box	1,225			1,217			1	%	1,205			1,182			2	%
U.S. Overnight Envelope	711			681			4	%	708			668			6	%
U.S. Deferred	965			1,086			(11	)%	916			961			(5	)%
Total U.S. Domestic Package	2,901			2,984			(3	)%	2,829			2,811			1	%
International Priority	478			435			10	%	467			432			8	%
Total Average Daily Packages	3,379			3,419			(1	)%	3,296			3,243			2	%
Average Daily Freight Pounds (000s):
U.S.	9,619			9,331			3	%	9,343			8,842			6	%
International	2,177			1,868			17	%	2,165			1,867			16	%
Total Avg Daily Freight Pounds	11,796			11,199			5	%	11,508			10,709			7	%
YIELD
Revenue Per Package:
U.S. Overnight Box	$	21.03		$	19.79		6	%	$	20.80		$	19.66		6	%
U.S. Overnight Envelope	11.01			10.51			5	%	10.81			10.35			4	%
U.S. Deferred	12.54			11.26			11	%	12.29			11.44			7	%
Total U.S. Domestic Package	15.75			14.57			8	%	15.55			14.63			6	%
International Priority	57.00			56.14			2	%	57.24			54.73			5	%
Composite Package Yield	$	21.59		$	19.86		9	%	$	21.46		$	19.97		7	%
Revenue Per Freight Pound:
U.S.	$	0.96		$	0.82		17	%	$	0.93		$	0.81		15	%
International	0.80			0.81			(1	)%	0.80			0.78			3	%
Composite Freight Yield	$	0.93		$	0.82		13	%	$	0.90		$	0.81		11	%
Average Full-Time Equivalents (000s)	126			126			—		125			123			2	%

10

FEDEX GROUND SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS

Third Quarter Fiscal 2006

(Dollars in millions)

(Unaudited)

	Three Months Ended February 28								Nine Months Ended February 28
	2006			2005			%		2006			2005			%
FINANCIAL HIGHLIGHTS
Revenue	$	1,363		$	1,200		14	%	$	3,889		$	3,447		13	%
Operating Expenses:
Salaries and employee benefits	237			214			11	%	688			624			10	%
Purchased transportation	517			464			11	%	1,489			1,330			12	%
Rentals	35			31			13	%	102			89			15	%
Depreciation and amortization	58			47			23	%	161			130			24	%
Fuel	21			11			91	%	66			31			113	%
Maintenance and repairs	29			28			4	%	86			80			8	%
Intercompany charges	135			124			9	%	384			358			7	%
Other	144			132			9	%	415			374			11	%
Total Operating Expenses	1,176			1,051			12	%	3,391			3,016			12	%
Operating Income	$	187		$	149		26	%	$	498		$	431		16	%
Operating Margin	13.7		%	12.4		%	1.3	pts	12.8		%	12.5		%	0.3	pts
OPERATING STATISTICS
Operating Weekdays	62			63			(2	)%	190			191			(1	)%
Average Daily Package Volume(1) (000s)	2,944			2,660			11	%	2,788			2,609			7	%
Yield (Revenue Per Package)(1)	$	7.10		$	6.79		5	%	$	6.97		$	6.60		6	%

⁽¹⁾ - - Package statistics exclude FedEx SmartPost.

11

FEDEX FREIGHT SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS

Third Quarter Fiscal 2006

(Dollars in millions)

(Unaudited)

	Three Months Ended February 28								Nine Months Ended February 28
	2006			2005			%		2006			2005			%
FINANCIAL HIGHLIGHTS
Revenue	$	848		$	747		14	%	$	2,672		$	2,374		13	%
Operating Expenses:
Salaries and employee benefits	449			404			11	%	1,330			1,220			9	%
Purchased transportation	68			71			(4	)%	221			243			(9	)%
Rentals and landing fees	23			25			(8	)%	72			76			(5	)%
Depreciation and amortization	29			25			16	%	88			75			17	%
Fuel	87			61			43	%	273			180			52	%
Maintenance and repairs	30			33			(9	)%	88			95			(7	)%
Intercompany charges	9			6			50	%	27			19			42	%
Other	80			68			18	%	230			207			11	%
Total Operating Expenses	775			693			12	%	2,329			2,115			10	%
Operating Income	$	73		$	54		35	%	$	343		$	259		32	%
Operating Margin	8.6		%	7.2		%	1.4	pts	12.8		%	10.9		%	1.9	pts
OPERATING STATISTICS
LTL Operating Weekdays	62			62			—		189			189			—
LTL Shipments Per Day (000s)	64			60			7	%	66			63			5	%
Weight Per LTL Shipment (lbs)	1,141			1,129			1	%	1,145			1,129			1	%
LTL Revenue/CWT	$	16.74		$	15.58		7	%	$	16.70		$	15.36		9	%

12

FEDEX KINKO’S SEGMENT FINANCIAL HIGHLIGHTS

Third Quarter Fiscal 2006

(Dollars in millions)

(Unaudited)

	Three Months Ended February 28								Nine Months Ended February 28
	2006			2005			%		2006			2005			%
FINANCIAL HIGHLIGHTS
Revenue	$	501		$	499		0	%	$	1,546		$	1,513		2	%
Operating Expenses:
Salaries and employee benefits	185			185			—		561			553			1	%
Rentals	94			103			(9	)%	295			312			(5	)%
Depreciation and amortization	35			36			(3	)%	108			100			8	%
Maintenance and repairs	18			17			6	%	55			51			8	%
Intercompany charges	8			(1		)	NM		18			5			260	%
Other operating expenses:
Supplies, including paper and toner	67			70			(4	)%	204			205			(0	)%
Other	87			78			12	%	266			228			17	%
Total Operating Expenses	494			488			1	%	1,507			1,454			4	%
Operating Income	$	7		$	11		(36	)%	$	39		$	59		(34	)%
Operating Margin	1.4		%	2.2		%	(0.8	)pts	2.5		%	3.9		%	(1.4	)pts

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

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