þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware (State or other jurisdiction of incorporation or organization) |
71-0427007 (I.R.S. Employer Identification No.) |
|
3610 Hacks Cross Road | ||
Memphis, Tennessee | 38125 | |
(Address of principal executive offices) | (ZIP Code) |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
- 2 -
November 30, | ||||||||
2011 | May 31, | |||||||
(Unaudited) | 2011 | |||||||
ASSETS |
||||||||
CURRENT ASSETS |
||||||||
Cash and cash equivalents |
$ | 675 | $ | 626 | ||||
Receivables, less allowances of $91 and $83 |
1,648 | 1,645 | ||||||
Spare parts, supplies and fuel, less
allowances of $176 and $169 |
364 | 367 | ||||||
Deferred income taxes |
416 | 398 | ||||||
Due from parent company and other FedEx subsidiaries |
228 | 607 | ||||||
Prepaid expenses and other |
98 | 90 | ||||||
Total current assets |
3,429 | 3,733 | ||||||
PROPERTY AND EQUIPMENT, AT COST |
22,990 | 21,622 | ||||||
Less accumulated depreciation and amortization |
11,430 | 11,110 | ||||||
Net property and equipment |
11,560 | 10,512 | ||||||
OTHER LONG-TERM ASSETS |
||||||||
Goodwill |
1,158 | 1,085 | ||||||
Other assets |
1,055 | 1,016 | ||||||
Total other long-term assets |
2,213 | 2,101 | ||||||
$ | 17,202 | $ | 16,346 | |||||
- 3 -
November 30, | ||||||||
2011 | May 31, | |||||||
(Unaudited) | 2011 | |||||||
LIABILITIES AND OWNERS EQUITY |
||||||||
CURRENT LIABILITIES |
||||||||
Current portion of long-term debt |
$ | 428 | $ | 17 | ||||
Accrued salaries and employee benefits |
906 | 836 | ||||||
Accounts payable |
1,125 | 1,092 | ||||||
Accrued expenses |
1,056 | 1,084 | ||||||
Due to other FedEx subsidiaries |
456 | 283 | ||||||
Total current liabilities |
3,971 | 3,312 | ||||||
LONG-TERM DEBT, LESS CURRENT PORTION |
239 | 655 | ||||||
OTHER LONG-TERM LIABILITIES |
||||||||
Deferred income taxes |
2,129 | 1,994 | ||||||
Pension, postretirement healthcare and
other benefit obligations |
892 | 867 | ||||||
Self-insurance accruals |
633 | 631 | ||||||
Deferred lease obligations |
812 | 695 | ||||||
Deferred gains, principally related to
aircraft transactions |
232 | 244 | ||||||
Other liabilities |
140 | 115 | ||||||
Total other long-term liabilities |
4,838 | 4,546 | ||||||
COMMITMENTS AND CONTINGENCIES |
||||||||
OWNERS EQUITY |
||||||||
Common stock, $0.10 par value; 1,000 shares
authorized, issued and outstanding |
| | ||||||
Additional paid-in capital |
608 | 608 | ||||||
Retained earnings |
7,514 | 7,107 | ||||||
Accumulated other comprehensive income |
32 | 118 | ||||||
Total owners equity |
8,154 | 7,833 | ||||||
$ | 17,202 | $ | 16,346 | |||||
- 4 -
Three Months Ended | Six Months Ended | |||||||||||||||
November 30, | November 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
REVENUES |
$ | 6,406 | $ | 5,841 | $ | 12,815 | $ | 11,610 | ||||||||
OPERATING EXPENSES: |
||||||||||||||||
Salaries and employee benefits |
2,306 | 2,187 | 4,648 | 4,381 | ||||||||||||
Purchased transportation |
339 | 307 | 675 | 597 | ||||||||||||
Rentals and landing fees |
415 | 421 | 833 | 819 | ||||||||||||
Depreciation and amortization |
285 | 263 | 564 | 515 | ||||||||||||
Fuel |
1,039 | 802 | 2,115 | 1,556 | ||||||||||||
Maintenance and repairs |
352 | 319 | 731 | 669 | ||||||||||||
Intercompany charges, net |
541 | 505 | 1,082 | 1,011 | ||||||||||||
Other |
790 | 782 | 1,546 | 1,456 | ||||||||||||
6,067 | 5,586 | 12,194 | 11,004 | |||||||||||||
OPERATING INCOME |
339 | 255 | 621 | 606 | ||||||||||||
OTHER INCOME (EXPENSE): |
||||||||||||||||
Interest, net |
12 | 1 | 20 | 4 | ||||||||||||
Other, net |
(7 | ) | (19 | ) | (20 | ) | (37 | ) | ||||||||
5 | (18 | ) | | (33 | ) | |||||||||||
INCOME BEFORE INCOME TAXES |
344 | 237 | 621 | 573 | ||||||||||||
PROVISION FOR INCOME TAXES |
123 | 85 | 215 | 209 | ||||||||||||
NET INCOME |
$ | 221 | $ | 152 | $ | 406 | $ | 364 | ||||||||
- 5 -
Six Months Ended | ||||||||
November 30, | ||||||||
2011 | 2010 | |||||||
Operating Activities: |
||||||||
Net income |
$ | 406 | $ | 364 | ||||
Noncash charges: |
||||||||
Depreciation and amortization |
564 | 515 | ||||||
Other, net |
184 | 113 | ||||||
Changes in assets and liabilities, net |
664 | 661 | ||||||
Cash provided by operating activities |
1,818 | 1,653 | ||||||
Investing Activities: |
||||||||
Capital expenditures |
(1,623 | ) | (1,601 | ) | ||||
Business acquisition, net of cash acquired |
(114 | ) | | |||||
Other |
3 | 5 | ||||||
Cash used in investing activities |
(1,734 | ) | (1,596 | ) | ||||
Financing Activities: |
||||||||
Principal payments on debt |
(17 | ) | (12 | ) | ||||
Cash used in financing activities |
(17 | ) | (12 | ) | ||||
Effect of exchange rate changes on cash |
(18 | ) | 24 | |||||
Net increase in cash and cash equivalents |
49 | 69 | ||||||
Cash and cash equivalents at beginning of period |
626 | 512 | ||||||
Cash and cash equivalents at end of period |
$ | 675 | $ | 581 | ||||
- 6 -
- 7 -
Three Months Ended | ||||||||
2011 | 2010 | |||||||
Net income |
$ | 221 | $ | 152 | ||||
Other comprehensive income: |
||||||||
Foreign currency translation adjustments, net of
tax of $23 in 2011 and $11 in 2010 |
(103 | ) | 42 | |||||
Comprehensive income |
$ | 118 | $ | 194 | ||||
Six Months Ended | ||||||||
2011 | 2010 | |||||||
Net income |
$ | 406 | $ | 364 | ||||
Other comprehensive income: |
||||||||
Foreign currency translation adjustments, net of
tax of $20 in 2011 and $16 in 2010 |
(86 | ) | 69 | |||||
Comprehensive income |
$ | 320 | $ | 433 | ||||
Three Months Ended | Six Months Ended | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Pension plans sponsored by FedEx |
$ | 80 | $ | 81 | $ | 160 | $ | 161 | ||||||||
Other U.S. domestic and international
pension plans |
11 | 11 | 21 | 21 | ||||||||||||
U.S. domestic and international
defined contribution
plans |
52 | 37 | 108 | 75 | ||||||||||||
Postretirement healthcare plans |
14 | 12 | 28 | 24 | ||||||||||||
$ | 157 | $ | 141 | $ | 317 | $ | 281 | |||||||||
- 8 -
Aircraft and | ||||||||||||
Aircraft- | ||||||||||||
Related | Other (1) | Total | ||||||||||
2012 (remainder) |
$ | 389 | $ | 10 | $ | 399 | ||||||
2013 |
983 | 12 | 995 | |||||||||
2014 |
780 | 12 | 792 | |||||||||
2015 |
555 | 8 | 563 | |||||||||
2016 |
580 | 33 | 613 | |||||||||
Thereafter |
3,225 | 105 | 3,330 |
(1) | Primarily advertising and promotions contracts. |
B777F(1) | B757 | Total | ||||||||||
2012 (remainder) |
2 | 8 | 10 | |||||||||
2013 |
4 | 6 | 10 | |||||||||
2014 |
7 | | 7 | |||||||||
2015 |
3 | | 3 | |||||||||
2016 |
3 | | 3 | |||||||||
Thereafter |
9 | | 9 | |||||||||
Total |
28 | 14 | 42 | |||||||||
(1) | Reflects the deferral during
the second quarter of 2012 of
the delivery of two B777F aircraft from 2013 to after 2016. |
- 9 -
Operating Leases | ||||||||||||||||
Aircraft | Total | |||||||||||||||
Capital | and Related | Facilities | Operating | |||||||||||||
Leases | Equipment | and Other | Leases | |||||||||||||
2012 (remainder) |
$ | 14 | $ | 370 | $ | 352 | $ | 722 | ||||||||
2013 |
118 | 499 | 640 | 1,139 | ||||||||||||
2014 |
| 473 | 551 | 1,024 | ||||||||||||
2015 |
| 455 | 517 | 972 | ||||||||||||
2016 |
| 458 | 403 | 861 | ||||||||||||
Thereafter |
| 1,545 | 3,585 | 5,130 | ||||||||||||
Total |
132 | $ | 3,800 | $ | 6,048 | $ | 9,848 | |||||||||
Less amount representing interest |
4 | |||||||||||||||
Present value of net minimum lease
payments |
$ | 128 | ||||||||||||||
- 10 -
2011 | 2010 | |||||||
Cash payments for: |
||||||||
Income taxes |
$ | 149 | $ | 190 | ||||
Income tax refunds received |
(50 | ) | (50 | ) | ||||
Cash tax payments, net |
$ | 99 | $ | 140 | ||||
- 11 -
/s/ Ernst & Young LLP |
- 12 -
Item 2. | Managements Discussion and Analysis of Results of Operations and Financial
Condition |
| the overall customer demand for our various services; |
| the volume of shipments transported through our network, as measured by our average daily
volume and shipment weight; |
| the mix of services purchased by our customers; |
| the prices we obtain for our services, as measured by average revenue per package (yield); |
| our ability to manage our cost structure (capital expenditures and operating expenses) to
match shifting volume levels; and |
| the timing and amount of fluctuations in fuel prices and our ability to recover incremental
fuel costs through our fuel surcharges. |
- 13 -
Three Months Ended | Percent | Six Months Ended | Percent | |||||||||||||||||||||
2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||
Revenues: |
||||||||||||||||||||||||
Package: |
||||||||||||||||||||||||
U.S. overnight box |
$ | 1,623 | $ | 1,489 | 9 | $ | 3,263 | $ | 2,980 | 9 | ||||||||||||||
U.S. overnight envelope |
421 | 416 | 1 | 872 | 848 | 3 | ||||||||||||||||||
U.S. deferred |
731 | 666 | 10 | 1,462 | 1,327 | 10 | ||||||||||||||||||
Total U.S. domestic package revenue |
2,775 | 2,571 | 8 | 5,597 | 5,155 | 9 | ||||||||||||||||||
International priority |
2,171 | 2,009 | 8 | 4,369 | 3,983 | 10 | ||||||||||||||||||
International
domestic(1) |
217 | 165 | 32 | 424 | 313 | 35 | ||||||||||||||||||
Total package revenue |
5,163 | 4,745 | 9 | 10,390 | 9,451 | 10 | ||||||||||||||||||
Freight: |
||||||||||||||||||||||||
U.S. |
628 | 530 | 18 | 1,219 | 1,053 | 16 | ||||||||||||||||||
International priority |
470 | 435 | 8 | 919 | 841 | 9 | ||||||||||||||||||
International airfreight |
74 | 69 | 7 | 151 | 139 | 9 | ||||||||||||||||||
Total freight revenue |
1,172 | 1,034 | 13 | 2,289 | 2,033 | 13 | ||||||||||||||||||
Other |
71 | 62 | 15 | 136 | 126 | 8 | ||||||||||||||||||
Total revenues |
6,406 | 5,841 | 10 | 12,815 | 11,610 | 10 | ||||||||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Salaries and employee benefits |
2,306 | 2,187 | 5 | 4,648 | 4,381 | 6 | ||||||||||||||||||
Purchased transportation |
339 | 307 | 10 | 675 | 597 | 13 | ||||||||||||||||||
Rentals and landing fees |
415 | 421 | (1 | ) | 833 | 819 | 2 | |||||||||||||||||
Depreciation and amortization |
285 | 263 | 8 | 564 | 515 | 10 | ||||||||||||||||||
Fuel |
1,039 | 802 | 30 | 2,115 | 1,556 | 36 | ||||||||||||||||||
Maintenance and repairs |
352 | 319 | 10 | 731 | 669 | 9 | ||||||||||||||||||
Intercompany charges |
541 | 505 | 7 | 1,082 | 1,011 | 7 | ||||||||||||||||||
Other |
790 | 782 | (2) | 1 | 1,546 | 1,456 | (2) | 6 | ||||||||||||||||
Total operating expenses |
6,067 | 5,586 | 9 | 12,194 | 11,004 | 11 | ||||||||||||||||||
Operating income |
$ | 339 | $ | 255 | 33 | $ | 621 | $ | 606 | 2 | ||||||||||||||
Operating margin |
5.3 | % | 4.4 | % | 90 | bp | 4.8 | % | 5.2 | % | (40 | )bp | ||||||||||||
Other income (expense): |
||||||||||||||||||||||||
Interest, net |
12 | 1 | NM | 20 | 4 | NM | ||||||||||||||||||
Other, net |
(7 | ) | (19 | ) | (63 | ) | (20 | ) | (37 | ) | (46 | ) | ||||||||||||
5 | (18 | ) | NM | | (33 | ) | NM | |||||||||||||||||
Income before income taxes |
344 | 237 | 45 | 621 | 573 | 8 | ||||||||||||||||||
Provision for income taxes |
123 | 85 | 45 | 215 | 209 | 3 | ||||||||||||||||||
Net income |
$ | 221 | $ | 152 | 45 | $ | 406 | $ | 364 | 12 | ||||||||||||||
(1) | International domestic revenues
include our international intra-country operations,
including our February 2011 business acquisition in India and our July 2011 business acquisition in
Mexico. |
|
(2) | Includes a $66 million legal reserve associated with the ATA Airlines lawsuit. |
- 14 -
Percent of Revenue | Percent of Revenue | |||||||||||||||
Three | Three | Six | Six | |||||||||||||
Months | Months | Months | Months | |||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Operating expenses: |
||||||||||||||||
Salaries and employee benefits |
36.0 | % | 37.4 | % | 36.3 | % | 37.7 | % | ||||||||
Purchased transportation |
5.3 | 5.3 | 5.3 | 5.2 | ||||||||||||
Rentals and landing fees |
6.5 | 7.2 | 6.5 | 7.1 | ||||||||||||
Depreciation and amortization |
4.4 | 4.5 | 4.4 | 4.4 | ||||||||||||
Fuel |
16.2 | 13.7 | 16.5 | 13.4 | ||||||||||||
Maintenance and repairs |
5.5 | 5.5 | 5.7 | 5.8 | ||||||||||||
Intercompany charges |
8.5 | 8.6 | 8.4 | 8.7 | ||||||||||||
Other |
12.3 | 13.4 | (1) | 12.1 | 12.5 | (1) | ||||||||||
Total operating expenses |
94.7 | 95.6 | 95.2 | 94.8 | ||||||||||||
Operating margin |
5.3 | % | 4.4 | % | 4.8 | % | 5.2 | % | ||||||||
(1) | Includes a $66 million legal reserve associated with the ATA Airlines lawsuit. |
Three Months Ended | Percent | Six Months Ended | Percent | |||||||||||||||||||||
2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||
Package Statistics |
||||||||||||||||||||||||
Average daily package volume (ADV): |
||||||||||||||||||||||||
U.S. overnight box |
1,168 | 1,196 | (2 | ) | 1,151 | 1,182 | (3 | ) | ||||||||||||||||
U.S. overnight envelope |
582 | 626 | (7 | ) | 589 | 625 | (6 | ) | ||||||||||||||||
U.S. deferred |
838 | 865 | (3 | ) | 834 | 855 | (2 | ) | ||||||||||||||||
Total U.S. domestic ADV |
2,588 | 2,687 | (4 | ) | 2,574 | 2,662 | (3 | ) | ||||||||||||||||
International priority |
569 | 585 | (3 | ) | 556 | 575 | (3 | ) | ||||||||||||||||
International domestic(1) |
529 | 354 | 49 | 486 | 339 | 43 | ||||||||||||||||||
Total ADV |
3,686 | 3,626 | 2 | 3,616 | 3,576 | 1 | ||||||||||||||||||
Revenue per package (yield): |
||||||||||||||||||||||||
U.S. overnight box |
$ | 22.05 | $ | 19.75 | 12 | $ | 22.15 | $ | 19.70 | 12 | ||||||||||||||
U.S. overnight envelope |
11.48 | 10.54 | 9 | 11.56 | 10.59 | 9 | ||||||||||||||||||
U.S. deferred |
13.84 | 12.24 | 13 | 13.70 | 12.12 | 13 | ||||||||||||||||||
U.S. domestic composite |
17.01 | 15.19 | 12 | 16.99 | 15.13 | 12 | ||||||||||||||||||
International priority |
60.56 | 54.54 | 11 | 61.42 | 54.12 | 13 | ||||||||||||||||||
International domestic(1) |
6.51 | 7.39 | (12 | ) | 6.81 | 7.22 | (6 | ) | ||||||||||||||||
Composite package yield |
22.23 | 20.77 | 7 | 22.45 | 20.65 | 9 | ||||||||||||||||||
Freight Statistics |
||||||||||||||||||||||||
Average daily freight pounds: |
||||||||||||||||||||||||
U.S. |
7,630 | 7,459 | 2 | 7,295 | 7,179 | 2 | ||||||||||||||||||
International priority |
3,451 | 3,320 | 4 | 3,289 | 3,171 | 4 | ||||||||||||||||||
International airfreight |
1,213 | 1,243 | (2 | ) | 1,188 | 1,242 | (4 | ) | ||||||||||||||||
Total average daily
freight pounds |
12,294 | 12,022 | 2 | 11,772 | 11,592 | 2 | ||||||||||||||||||
Revenue per pound (yield): |
||||||||||||||||||||||||
U.S. |
$ | 1.31 | $ | 1.13 | 16 | $ | 1.31 | $ | 1.15 | 14 | ||||||||||||||
International priority |
2.16 | 2.08 | 4 | 2.18 | 2.07 | 5 | ||||||||||||||||||
International airfreight |
0.97 | 0.88 | 10 | 0.99 | 0.87 | 14 | ||||||||||||||||||
Composite freight yield |
1.51 | 1.36 | 11 | 1.52 | 1.37 | 11 |
(1) | International domestic statistics include our international
intra-country operations, including our February 2011
business acquisition in India and our July 2011 business
acquisition in Mexico. |
- 15 -
Three Months Ended | Six Months Ended | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
U.S. Domestic and Outbound Fuel
Surcharge: |
||||||||||||||||
Low |
14.00 | % | 7.00 | % | 14.00 | % | 7.00 | % | ||||||||
High |
15.50 | 8.50 | 16.50 | 10.00 | ||||||||||||
Weighted-average |
14.67 | 7.82 | 15.10 | 8.17 | ||||||||||||
International Fuel Surcharges: |
||||||||||||||||
Low |
14.00 | 7.00 | 14.00 | 7.00 | ||||||||||||
High |
21.00 | 13.50 | 23.00 | 14.00 | ||||||||||||
Weighted-average |
17.33 | 10.59 | 17.63 | 10.83 |
- 16 -
| economic conditions in the global markets in which we operate; |
| damage to our reputation or loss of brand equity; |
| disruptions to the Internet or our technology infrastructure, including those impacting our
computer systems and Web site, which can adversely affect our operations and reputation among
customers; |
|
| the price and availability of jet and vehicle fuel; |
- 17 -
| our ability to manage our cost structure for capital expenditures and operating expenses,
and match it to shifting and future customer volume levels; |
| the impact of intense competition on our ability to maintain or increase our prices
(including our fuel surcharges in response to rising fuel costs) or to maintain or grow our
market share; |
| our ability to maintain good relationships with our employees and prevent attempts by labor
organizations to organize groups of our employees, which could significantly increase our
operating costs and reduce our operational flexibility; |
| our ability to effectively operate, integrate, leverage and grow acquired businesses, and
to continue to support the value we allocate to these acquired businesses, including their
goodwill; |
| any impacts on our businesses resulting from new domestic or international government laws
and regulation, including regulatory actions affecting global aviation rights, increased air
cargo and other security or pilot safety requirements, and tax, accounting, trade (such as
protectionist measures enacted in response to weak economic conditions), labor (such as
card-check legislation or changes to the Railway Labor Act affecting our employees),
environmental (such as global climate change legislation) or postal rules; |
| adverse weather conditions or localized natural disasters in key geographic areas, such as
earthquakes, volcanoes, and hurricanes, which can disrupt our electrical service, damage our
property, disrupt our operations, increase our fuel costs and adversely affect our shipment
levels; |
| increasing costs, the volatility of costs and funding requirements and other legal mandates
for employee benefits, especially pension and healthcare benefits; |
| the impact of any international conflicts or terrorist activities on the United States and
global economies in general, the transportation industry or us in particular, and what effects
these events will have on our costs or the demand for our services; |
| changes in foreign currency exchange rates, especially in the euro, Chinese yuan, Canadian
dollar, British pound and Japanese yen, which can affect our sales levels and foreign currency
sales prices; |
| market acceptance of our new service and growth initiatives; |
| any liability resulting from and the costs of defending against class-action litigation,
such as wage-and-hour and discrimination and retaliation claims, and any other legal
proceedings; |
| the outcome of future negotiations to reach new collective bargaining agreements
including with the union that represents our pilots (the current pilot contract is scheduled
to become amendable in March 2013 unless the union exercises its option to shorten the
contract, in which case the agreement would be amendable in March 2012); |
| any impact on our business from disruptions or modifications in service by the United
States Postal Service (USPS), which is a significant customer and vendor of ours, as a
consequence of the USPSs current financial difficulties or any resulting structural changes
to its operations, network, service offerings or pricing; |
|
| the impact of technology developments on our operations and on demand for our services, and
our ability to continue to identify and eliminate unnecessary information technology
redundancy and complexity throughout the organization; |
- 18 -
| widespread outbreak of an illness or any other communicable disease, or any other public
health crisis; |
| availability of financing on terms acceptable to FedEx and FedExs ability to maintain our
current credit ratings, especially given the capital intensity of our operations; |
| significant changes in the volumes of shipments transported through our networks, customer
demand for our various services or the prices we obtain for our services; and |
| other risks and uncertainties you can find in FedExs press releases and SEC filings,
including the risk factors identified under the heading Risk Factors in Managements
Discussion and Analysis of Results of Operations and Financial Condition in our Annual
Report, as updated by our quarterly reports on Form 10-Q. |
- 19 -
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item 4. | Controls and Procedures |
- 20 -
Item 1. | Legal Proceedings |
Item 1A. | Risk Factors |
Item 5. | Other Information |
Item 6. | Exhibits |
Exhibit | ||||
Number | Description of Exhibit | |||
10.1 | Supplemental Agreement No.19 (and related side letter) dated as of October 27, 2011, amending
the Boeing 777 Freighter Purchase Agreement dated as of November 7, 2006 between The Boeing
Company and Federal Express Corporation. Confidential treatment has been requested for
confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. (Filed as Exhibit 10.2 to FedEx Corporations FY12 Second
Quarter Report on Form 10-Q, and incorporated herein by reference.) |
|||
10.2 | Letter Agreement dated September 9, 2011, amending the Transportation Agreement dated July
31, 2006 between the United States Postal Service and Federal Express Corporation.
Confidential treatment has been requested for confidential commercial and financial
information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.
(Filed as Exhibit 10.3 to FedEx Corporations FY12 Second Quarter Report on Form 10-Q, and
incorporated herein by reference.) |
- 21 -
Exhibit | ||||
Number | Description of Exhibit | |||
12.1 | Computation of Ratio of Earnings to Fixed Charges. |
|||
15.1 | Letter re: Unaudited Interim Financial Statements. |
|||
31.1 | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under
the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. |
|||
31.2 | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under
the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. |
|||
32.1 | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|||
32.2 | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|||
101.1 | Interactive Data Files. |
- 22 -
FEDERAL EXPRESS CORPORATION |
||||
Date: December 16, 2011 | /s/ J. RICK BATEMAN | |||
J. RICK BATEMAN | ||||
VICE PRESIDENT AND WORLDWIDE CONTROLLER (PRINCIPAL ACCOUNTING OFFICER) |
- 23 -
Exhibit | ||||
Number | Description of Exhibit | |||
10.1 | Supplemental Agreement No.19 (and related side letter) dated as of October 27, 2011,
amending the Boeing 777 Freighter Purchase Agreement dated as of November 7, 2006 between
The Boeing Company and Federal Express Corporation. Confidential treatment has been
requested for confidential commercial and financial information, pursuant to Rule 24b-2
under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.2 to FedEx
Corporations FY12 Second Quarter Report on Form 10-Q, and incorporated herein by
reference.) |
|||
10.2 | Letter Agreement dated September 9, 2011, amending the Transportation Agreement dated
July 31, 2006 between the United States Postal Service and Federal Express Corporation.
Confidential treatment has been requested for confidential commercial and financial
information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.
(Filed as Exhibit 10.3 to FedEx Corporations FY12 Second Quarter Report on Form 10-Q, and
incorporated herein by reference.) |
|||
12.1 | Computation of Ratio of Earnings to Fixed Charges. |
|||
15.1 | Letter re: Unaudited Interim Financial Statements. |
|||
31.1 | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a)
under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|||
31.2 | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a)
under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|||
32.1 | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|||
32.2 | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|||
101.1 | Interactive Data Files. |
E-1
Six Months Ended | ||||||||||||||||||||||||||||
November 30, | Year Ended May 31, | |||||||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||||
Earnings: |
||||||||||||||||||||||||||||
Income before income taxes |
$ | 621 | $ | 573 | $ | 1,140 | $ | 1,059 | $ | 732 | $ | 1,846 | $ | 1,984 | ||||||||||||||
Add back: |
||||||||||||||||||||||||||||
Interest expense, net of capitalized
interest |
| | | | 4 | 19 | 40 | |||||||||||||||||||||
Portion of rent expense representative
of interest factor |
301 | 296 | 611 | 572 | 576 | 587 | 580 | |||||||||||||||||||||
Earnings as adjusted |
$ | 922 | $ | 869 | $ | 1,751 | $ | 1,631 | $ | 1,312 | $ | 2,452 | $ | 2,604 | ||||||||||||||
Fixed Charges: |
||||||||||||||||||||||||||||
Interest expense, net of capitalized
interest |
$ | | $ | | $ | | $ | | $ | 4 | $ | 19 | $ | 40 | ||||||||||||||
Capitalized interest |
45 | 32 | 61 | 65 | 58 | 46 | 32 | |||||||||||||||||||||
Portion of rent expense representative
of interest factor |
301 | 296 | 611 | 572 | 576 | 587 | 580 | |||||||||||||||||||||
$ | 346 | $ | 328 | $ | 672 | $ | 637 | $ | 638 | $ | 652 | $ | 652 | |||||||||||||||
Ratio of Earnings to Fixed Charges |
2.7 | 2.6 | 2.6 | 2.6 | 2.1 | 3.8 | 4.0 | |||||||||||||||||||||
/s/ Ernst & Young LLP |
1. | I have reviewed this quarterly report on Form 10-Q of Federal Express Corporation (the
registrant); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
4. | The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is
being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such
evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter that
has materially affected, or is reasonably likely to materially affect, the registrants
internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information;
and |
(b) | Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting. |
/s/ David J. Bronczek
|
||
President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Federal Express Corporation (the
registrant); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
4. | The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is
being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such
evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter that
has materially affected, or is reasonably likely to materially affect, the registrants
internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information;
and |
(b) | Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting. |
/s/ Cathy D. Ross
|
||
Executive Vice President and |
||
Chief Financial Officer |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of FedEx Express. |
/s/ David J. Bronczek
|
||
President and Chief Executive Officer |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of FedEx Express. |
/s/ Cathy D. Ross
|
||
Executive Vice President and Chief Financial Officer |
A;'T.*&`/"41I-1ZJ7EM1AH@?@#U453]^L@?F5A%H'-
M7)S1D,2ET8=:HU^RXN!KW:Y&S5&M>%26]+ZM-7!K:;8V=;\^;0[K!!Y,6%Q<
M][Z>4KMD4 L8!O5Z0>;[6@&5E)N^L\]18]37%H^?=PRO'#S
M`IL%_B+?C/%3_*QY+M_:F+JT,7418]J^M8+'L:ZSQ)X;:0ZS*UH&_K,#8PDS
M;!B8-D;0Z?OA'&\8&MDKC%Z<<.YXR/ BM5(]T5(43L=U%<2N9XNS<7:-IF]SM5(J.Q[]-8?S[+D0G
MSY>;=2PT_W_E\3"W*0QSJU'>.-[2=N+W(=0LP- +X;PE^2FZ13W&"PGSWKV@/
MG[(<"-\9'YN?YD\3XGIBE`[PJA5/NQ#@'SC.P/#DY3**$9%YV=SW0=C.>-C\
M5'P*:(M)Q4[-2F^6U\G00RJZ]3%B5]RS>_+`^M)H35;,&]K.V&2F9*F_)$&X
M8%6GYJK-+SFISZJ\"9Z!=_"`B=KK7GD;!.V,S\V_$D4*;$&=3DU?;W9EB1EU
M1ME]'`67,?9% (5) Contingencies ATA Airlines. In October 2010, a jury returned a verdict in favor of ATA Airlines in its breach of contract lawsuit against us and awarded damages of $66 million, and in January 2011, the court awarded ATA pre-judgment interest of $5 million. While we do not agree with the verdict or the amount of damages awarded and have appealed the matter to the U.S. Court of Appeals for the Seventh Circuit, accounting standards required an accrual of a $66 million loss in the second quarter of 2011. We did not accrue the $5 million of interest as a loss because we have additional arguments on appeal that lead us to believe that loss of that amount is not probable. The Seventh Circuit heard oral argument on our appeal in November 2011. California Paystub Class Action. A federal court in California ruled in April 2011 that paystubs for certain FedEx Express employees in California did not meet that state's requirements to reflect pay period begin date, total overtime hours worked and the correct overtime wage rate. The ruling came in a class action lawsuit filed by a former courier seeking damages on behalf of herself and all other FedEx Express employees in California that allegedly received noncompliant paystubs. The court certified the class in June 2011. The court has ruled that we are liable to the State of California, and there will be a ruling as to whether we are liable to class members who can prove they were injured by the paystub deficiencies. The judge has not yet decided on the amount, if any, of liability to the State of California or to the class, but has wide discretion. Prior to any decision on the amount of liability, we reached an agreement to settle this matter for an immaterial amount in October 2011, subject to approval by the court. Other. FedEx Express and its subsidiaries are subject to other legal proceedings that arise in the ordinary course of their business. In the opinion of management, the aggregate liability, if any, with respect to these other actions will not have a material adverse effect on our financial position, results of operations or cash flows.0F%">8^<).)2T(^
M^2YQIJ`\17(:?]P8DI\=A@YY/!Z3]Z[TI
(=3>Z,%U1>E0%0&G_,`@U1W$#-]FP6#?_/L
M`H:V4K&L#H8U=1F!LF'PA;CU%96#O=DTKA.*UT6PA(Y-X<50E%2J[G'!9&<3
M1:H&+>7@!&TMX!L`,QCQ$A?8&MYP417@;)3(L0U!/\F,S3GX>NGO53\0XIGL
M!YK4&BP*P@6.F.S8,=#N$(YJ6'>P(]@8O`)[?:"+$O.=0(2%#CGH?H=,?25\
M"$T1B84);E5ZI,]@Y;)F:*SLBI!H;.\XH*@+'9!7H
(?0
M=F1&"UQ$"0HM"W6*M0Z95P`9)+<+Y2EV3Q8J3W')HQZY^CQ5>;]B"P6/7&B!
M85*OV%866MH>VJ4\Q77D_+E@K0"<%UKB;W1-^@8VM=@!4VR_"T@QU#P:5'D]
MX05I=;8;J`BF5D.V@VKP6^'JBTR\F98_4SE?+((]K9@M<,YOPX\>6Y)8E/0!
M8_%PTA),/&*Q$LX6U`1BR3R7FYC.P,F%4"$$?X@B%#F'AZ">+V63$H&)\M";
MY0,9]JL>R`R`S"D]R;>CB0E*(A3$W+>#)$04Z@39I_TB>CF)D"(+L)T^N(6Y
MSWO+>?SJKU:6#"VHM7E)[,T=C!N7.QA7ECN(RY&@<`E*%R)Z3-33O0LF;1OW
MLMC'PL*6"0Y/!9,6W">%
M6GI`7SIWG26T!X(/DZ^DFDD8$D)H![8O$[\X=-1HW>`+-N_>IC)/X7I!!5WQBU@F`=&TN[<9#SE\;P!XE
MR;?/8D=&=T6R 7NNBF(
MU^T`BB\AE%31!F:K&I9/E4O;E'Z_``C3,"DA1OJ9NYQM6-`(0OJ[%&T7(2
MJI#Y:/EJ)&`])WK?YB2<(HHC<5#P/"-,C)FJ2JJZ1=#UYB5\C=:J8QTE+!\]
ML?JH9/]:?B65^,F!*.%=#U`:P9.NL+)NJO)^D,:7D%FCL6H:*4!Y5)6R#1(Y
MP)&10VD@8_JK4%='C8]J_;ZE
MV;:1_U)ZU2?!?[.((!`ZS)A\Z(32RI8/`51E>:_O]D28RBABMNM!KS$'S=WG
M]&$;AJ4A8
U@J\!FKO$D66&/86;H=D)\6=+72MP&%XMR=O
M)^Y6QW(RAOTZ3"$C6LS2FN97X9K[>P
6 Months Ended
Loss Contingency [Abstract]
Contingencies