SC 14D9 1 sch14d9-4.txt Q & A TRANSCRIPTION SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- SCHEDULE 14D-9 Solicitation/Recommendation Statement under Section 14(d)(4) of the Securities Exchange Act of 1934 ---------- American Freightways Corporation --------------------------------- (Name of Subject Company) American Freightways Corporation ------------------------- (Name of Persons Filing Statement) Common Stock, $0.01 Par Value ------------------------------- (Title of Class of Securities) 02629V108 ------------------------------------- (CUSIP Number of Class of Securities) ---------- Frank Conner American Freightways Corporation 2200 Forward Drive Harrison, Arkansas 72601 (870) 741-9000 ------------------- (Name, address and telephone number of person authorized to receive notices and communications on behalf of the persons filing statement) [x] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. 1 1 2 3 4 5 6 7 8 9 10 AMERICAN FREIGHTWAYS ANNOUNCEMENT 11 HARRISON, ARKANSAS 12 TAPE TRANSCRIPTION 13 OF 14 QUESTION AND ANSWER SESSION 15 NOVEMBER 13, 2000 16 17 18 TRANSCRIPT OF MAIN PRESENTATION PREVIOUSLY FILED 19 20 21 22 23 24 2 1 JOHN SHERMAN (MODERATOR): WE'D LIKE TO JUST TAKE A MOMENT AND ASK SOME QUESTIONS FROM THE CROWD HERE, AH, WE'VE GOT ONE RIGHT UP FRONT HERE. 2 SPEAKER: I'M DIRECTOR OF PRICING 3 HERE AT AMERICAN. AND I'M JUST CURIOUS HOW LONG IT 4 WOULD BE BEFORE THE DEAL IS CONSUMMATED TO THE POINT 5 WHERE OUR TWO COMPANIES, VIKING AND AMERICAN, WILL 6 BEGIN SHARING FREIGHT. 7 FRED SMITH: WELL, I THINK THE 8 FINANCIAL TRANSACTION WILL BE MOSTLY COMPLETE BY 9 JANUARY. AND THEN TOTALLY COMPLETE -- I THINK THE 10 TARGET DATE'S THE FIRST WEEK IN MARCH. NOW, WE 11 CAN'T REALLY DO ANYTHING OPERATIONALLY UNTIL AFTER 12 THE FIRST HALF OF THE TRANSACTION IS COMPLETED, 13 WHEN THE TENDER IS DONE. AND I THINK THAT'S RIGHT 14 AFTER THE FIRST OF THE YEAR. BUT REGARDING THE 15 INTERCHANGE OF FREIGHT, I THINK THAT WOULD BE UP TO 16 DOUG AND TOM, AND THEY WOULD BE A LOT MORE ABLE TO 17 TALK ABOUT IT THAN I CAN. SO I WOULD ASK THEM TO 18 ANSWER THAT. 19 DOUG DUNCAN: THE INFORMATION I'VE 20 GOTTEN IS I THINK BY MID TO THE LATTER PART OF 21 DECEMBER WE WILL ACTUALLY BEGIN TO START DOING THE 22 PLANNING. WE WILL THEN BE FREE TO HAVE DISCUSSIONS 23 AS TO HOW WE ADDRESS SOME OF THOSE ISSUES. THAT 24 WAY, WE'LL BE IN PLACE TO EXECUTE THEM AS SOON AS 3 1 THE TRANSACTION IS COMPLETE. 2 TOM GARRISON: I WOULD EXPECT THAT WE 3 WOULD BE ABLE TO TAKE OVER THE INTERCHANGE OF ANY 4 FREIGHT THAT WE'RE HANDING OFF TO OTHER CARRIERS IN 5 A PRETTY QUICK ORDER. AND THEN AS FAR AS MARKETING 6 AND SELLING ACROSS THE TWO COMPANIES, IT WOULD BE 7 VERY IMPORTANT THAT WE KNEW OUR PRICING STRATEGIES 8 WERE VERY SOUND AND VERY CONTROLLED AND THAT WE'RE 9 VERY CAREFUL TO CONTROL WHAT KIND OF BUSINESS WE 10 GET ON TO THE TRUCKS AND WHAT BUSINESS IS MOVING 11 BACK AND FORTH, HOW MUCH CAPACITY IT'S TAKING UP 12 AND HOW MUCH YIELD AND PROFIT IT'S PRODUCING FOR 13 US. THERE IS NO REASON WE SHOULD BE HAULING 14 TRAFFIC BETWEEN THE TWO COMPANIES THAT ISN'T 15 PROFITABLE. 16 JOHN SHERMAN: LET ME ASK YOU THIS, AS 17 THE MANAGEMENT COMMITTEE, WHAT QUESTIONS DO YOU 18 THINK WE'RE GOING TO HAVE FROM OUR ASSOCIATES IN 19 THE FIELD? 20 SPEAKER: ARE THEIR BENEFITS GOING 21 TO BE CHANGING? 22 JOHN SHERMAN: THE QUESTION IS, WHAT ARE 23 THE BENEFITS FOR THEM? ARE WE GOING TO HAVE ANY 24 BENEFIT CHANGES? ANYTHING THAT WILL CHANGE FOR THE 4 1 ASSOCIATES THAT ARE IN THE FIELD? 2 DOUG DUNCAN: WELL, DAY ONE, EVERYTHING 3 REMAINS THE SAME, YOU KNOW, AMERICAN IS AMERICAN, 4 VIKING IS VIKING. AND WE'LL GO DOWN THAT PATH. AND THEY 5 WILL REMAIN SEPARATE ENTITIES BECAUSE ONE OF THE 6 THINGS THAT WE HAVE TO BE VERY CLEAR ABOUT, IN MY 7 MIND AT LEAST, IS TO STAY FOCUSED ON REGIONAL 8 TRANSPORATION. I CAN TELL YOU, A LOT OF PEOPLE 9 WILL TRY TO PAINT US WITH A BRUSH NOW TO SAY WE'RE 10 NOW A NATIONAL COMPANY. AND WE ARE NOT. WE'RE A 11 REGIONAL TRANSPORTATION COMPANY THAT HAPPENS TO 12 SERVE ALL REGIONS OF THE COUNTRY. THE REGIONS ARE 13 DIFFERENT. I THINK TO KEEP THAT FOCUS DIFFERENT, 14 WE WILL REMAIN DIFFERENT IN THE WAY WE MANAGE AND 15 THE WAY WE OPERATE. WE'LL FIND WAYS TO PUT THEM 16 TOGETHER. THERE WILL BE WAYS TO PUT THEM 17 TOGETHER THAT MAKE SENSE FOR THE COMPANIES AND FOR 18 THE EMPLOYEES. AND THERE WILL BE REASONS TO KEEP 19 THEM SEPARATE AS WELL. SO, YOU KNOW, AS WE GET 20 THROUGH THAT, IF WE INTEND TO MAKE ANY CHANGES AND 21 IF WE INTEND TO UNIFY THINGS, WE'LL HAVE TO OPENLY 22 AND HONESTLY COMMUNICATE THAT AS WE GO ALONG. BUT, 23 YOU KNOW, FOR THE FORESEEABLE FUTURE, EACH WILL 24 STAY SEPARATE, EACH WILL HAVE IT'S OWN BENEFITS. 5 1 AND WHATEVER'S BEEN SUCCESSFULL FOR YOU TODAY, 2 WILL BE SUCCESSFULL FOR YOU TOMORROW. AND MY 3 BELIEF IS THAT THE COMBINATION IS GOING TO BE 4 POSITIVE, NOT NEGATIVE. SO, IF ANYTHING, I THINK 5 IT WILL TEND TO IMPROVE THINGS GOING FORWARD AND 6 I DON'T ANYTHING WILL BE TAKEN AWAY. 7 JOHN SHERMAN: ANY OTHER QUESTIONS? 8 EITHER THINGS THAT ARE GOING ON HERE IN THE HOME 9 OFFICE, INTEGRATION OF SYSTEMS, ANYTHING LIKE THAT? 10 OR, AGAIN, WHAT OUR ASSOCIATES MAY BE THINKING 11 ABOUT? 12 FRED SMITH: I'LL TELL YOU ONE THING, 13 WE'RE EXCITED 14 TO HAVE THIS HEADQUARTERS IN HARRISON, ARKANSAS. 15 I CAN TELL YOU THAT MUCH. IT'S A GREAT PART OF THE 16 COUNTRY AND WONDERFUL PEOPLE. SO I HOPE THERE IS 17 NO CONCERN ABOUT THAT. 18 SHERIDAN GARRISON: ONE QUESTION THAT OUR 19 ASSOCIATES MAY BE INTERESTED IN, YOU KNOW, 20 TRADITIONALLY, DURING THE FIRST WEEK OF MARCH EACH 21 YEAR, WE'VE ADJUSTED WAGES AND INTRODUCED NEW 22 BENEFITS AND WHAT HAVE YOU. AND WE WILL BE DOING 23 THAT AGAIN THIS COMING MARCH, FIRST SUNDAY IN 24 MARCH. WON'T CHANGE A THING. WE'LL STILL BE 6 1 LOOKING AT THINGS AND DOING EVERYTHING WE CAN TO 2 UPGRADE PEOPLE'S PAY AND THEIR BENEFITS AND IMPROVE 3 WORKING CONDITIONS AND HAVE A COMPANY THAT 4 EVERYBODY'S PROUD TO BE ASSOCIATED WITH. THAT WILL 5 STAY THE SAME. 6 FRED SMITH: LET ME JUST ADD SOMETHING 7 TO THAT. I THINK IT'S VERY IMPORTANT THAT ALL OF 8 THE AMERICAN FREIGHTWAYS ASSOCIATES UNDERSTAND THE 9 FEDEX STRATEGY OF "COMPETING COLLECTIVELY, BUT 10 OPERATING INDEPENDENTLY". TIME AND TIME AGAIN OVER 11 THE YEARS, I'VE WATCHED COMPANIES TRY TO DO TOO 12 MANY THINGS FOR TOO MANY DIFFERENT MARKET SEGMENTS, 13 TRY TO BE ALL THINGS TO ALL PEOPLE. AND THAT NEVER 14 WORKS. SO OUR STRATEGY IS TO HAVE A FAMILY OF 15 COMPANIES. THEY'RE IDENTIFIED WITH A LOT OF 16 DIFFERENT SIMILAR LOGOS OR PEOPLE KNOW THAT THEY'RE 17 PART OF THE SAME FAMILY, BUT THEY HAVE THEIR OWN 18 CEO, THEY FOCUS ON THEIR OWN MARKET SEGMENT AND THE 19 COST STRUCTURE AND THE BENEFITS AND THE WAGES AND 20 THINGS LIKE ARE DRIVEN BY WHAT THAT MARKET 21 WILL BEAR, AND THE CEO AND HIS OR HER MANAGEMENT 22 TEAM IS THEN HELD RESPONSIBLE FOR OPERATING THE 23 COMPANY. AS DOUG WILL TELL YOU, WHEN FED-EX 24 CORPORATION ACQUIRED VIKING, WE DIDN'T DO ANYTHING 7 1 TO VIKING. VIKING HAS RUN INDEPENDENTLY, AND ALL 2 OF THOSE ISSUES ARE DECIDED BY THE MANAGEMENT TEAM 3 INSIDE VIKING. THE SAME THING IS GOING TO BE 4 TRUE HERE. TOM'S THE CEO OF AMERICAN FREIGHTWAYS 5 AND TOM AND HIS TEAM ARE GOING TO MAKE THOSE 6 DETERMINATIONS. NOW, OUR LTL GROUP WILL OBVIOUSLY 7 TRY TO GET THE SYNERGIES OUT OF NOW HAVING 48 STATE 8 COVERAGE, BUT WITH FOCUSED REGIONAL OPERATING 9 COMPANIES. AND ALL OF YOU UNDERSTAND BETTER THAN I 10 DO THE GROWTH AREAS ARE IN THE REGIONAL MOVEMENT. 11 THE LONG-DISTANCE LTL BUSINESS IS A COMMODITY 12 BUSINESS. IT'S GROWING AT A COUPLE OF PERCENT PER 13 YEAR. PEOPLE ARE CHANGING THEIR DISTRIBUTION 14 PATTERNS SO THEY'VE GOT REGIONAL DISTRIBUTION 15 CENTERS. THEY WANT OVERNIGHT SERVICE OR TWO-DAY 16 REGIONAL SERVICE. AND WE'RE GOING TO BE ABLE TO 17 GIVE THEM THAT ON AN UNPRECEDENTED LEVEL IN ALL 18 REGIONS OF THE UNITED STATES. AND THEN 19 SELECTIVELY, YOU KNOW, ON AN INTERREGIONAL BASIS, 20 JUST AS YOU'RE DOING WITH AMERICAN FLYER AND SO 21 FORTH WITHIN THE AMERICAN FREIGHTWAYS OPERATING 22 AREA TODAY. AND AS TIME GOES ON AND DOUG AND TOM 23 AND TILTON GORE, THE CEO OF VIKING, CAN WORK IT 24 OUT, SELECTIVE PROFITABLE INTERREGIONAL MOVEMENTS 8 1 BETWEEN AMERICAN FREIGHTWAYS AND VIKING. SO IT'S 2 VERY IMPORTANT THAT EVERYBODY UNDERSTANDS THAT WE'RE 3 NOT JUST SAYING THESE THINGS TO MAKE EVERYBODY FEEL 4 GOOD ON THIS DAY WE'RE ANNOUNCINING THIS DEAL. WE 5 HAVE A HISTORY OF "OPERATING INDEPENDENTLY AND 6 COMPETING COLLECTIVELY". AND IT IS A POWERFUL 7 STRATEGY. A STRATEGY, I THINK, THAT WILL CONTINUE 8 TO BRING GREAT SUCCESS TO OUR COMPANY AND LOTS OF 9 OPPORTUNITIES FOR OUR TEAMMATES IN WHATEVER 10 OPERATING COMPANY. SO I SEE VIRTUALLY NO DOWN SIDE 11 FOR THE AMERICAN FREIGHTWAYS ASSOCIATES AND 12 TREMENDOUS UPSIDE. 13 JOHN SHERMAN: THANK YOU, FRED. YES, 14 SHERIDAN? 15 SHERIDAN GARRISON: JON, FOR ONE THING, I FIND 16 TO LOOK AT OTHER THINGS THAT BOTH VIKING AND FEDEX 17 DO AND DO DIFFERENTLY THAN WHAT WE DO AND SEE IF 18 THERE ARE WAYS THAT WE CAN IMPORT IDEAS INTO OUR 19 COMPANY HERE AND TAKE ADVANTAGE OF THE KNOWLEDGE THAT 20 VIKING HAS AND THE FEDEX PEOPLE HAVE SO THAT WE 21 CAN WIND UP WITH THE BEST OF ALL WORLDS. OF 22 COURSE, WE WILL BE HAPPY TO SHARE WHAT WE'RE DOING 23 WITH THEM. I THINK WE EACH GOT WHERE WE HAVE 24 GOTTEN -- WHICH WE ARE ALL SUCCESSFUL COMPANIES -- 9 1 BY HAVING GOOD OPERATING SYSTEMS AND EVERYTHING 2 LIKE THAT AND GOOD POLICIES, GOOD -- FEDEX, FOR 3 INSTANCE, HAS A GUARANTEED FAIR TREATMENT PROCESS, 4 WE HAVE AMERICAN DUE PROCESS. AND I THINK 5 THAT WE PATTERNED SOME OF OUR STUFF OFF OF YOURS. 6 YOU MAY HAVE MADE IMPROVEMENTS SINCE WE DID THAT. 7 SO WE'LL LOOK AT ALL THOSE THINGS AND SEE WHAT WE 8 CAN DO TO GET THE BEST OF EVERYTHING OUT THERE. 9 AND I THINK THERE WILL BE A TREMENDOUS AMOUNT OF 10 THINGS OUT THERE THAT WE CAN SWAP BACK AND FORTH 11 ON. DUNCAN, I KNOW, IS LOOKING AT IT THAT WAY. 12 DOUG DUNCAN: ABSOLUTELY. AND I THINK 13 FRED BRINGS UP A GREAT POINT IN THAT YOU CAN LOOK 14 AT WHAT'S HAPPENED AT VIKING AND SEE WHAT IT'S LIKE 15 TO BE PART OF FEDEX, YOU KNOW. THE CULTURE HASN'T 16 CHANGED, IT'S FLOURISHED. THE BENEFITS STILL REMAIN 17 THE SAME, AND WE HAVE THE OPPORTUNITY TO COMBINE 18 WITH FEDEX WHERE IT MADE A LOT OF SENSE, 19 ESPECIALLY IN THE TECHNOLOGY AREAS, TO UTILIZE 20 THINGS THAT FEDEX HAD ALREADY DEVELOPED AND TO 21 STAY SEPARATE IN THE AREA OF BENEFITS AND OTHER 22 THINGS THAT WE PARTICULARLY WANTED TO KEEP FOR OUR 23 OWN COMPANY. I THINK YOU'RE GOING TO SEE THE EXACT 24 SAME THING HAPPEN AT AMERICAN. WE HAVE THE FREEDOM 10 1 TO CHOOSE WHAT WE THINK WILL MAKE BEST SENSE FOR 2 THE BUSINESS TO KEEP IT SEPARATE AND ALSO KIND TO 3 STEAL FROM THE FED-EX SIDE OF THE HOUSE THE THINGS 4 THAT WE WANT TO TAKE ADVANTAGE OF. 5 SHERIDAN GARRISON: ONE THING I LIKE ABOUT IT, 6 THIS GENTLEMAN HERE HAS AGREED TO LET ME HAVE AN 7 OFFICE HERE AND SOME SECRETARIAL HELP SO I CAN 8 STILL BE ASSOCIATED WITH THIS COMPANY ON THE GROUND 9 FLOOR, SO TO SPEAK. I DON'T WANT TO LEAVE IT. I 10 WANT TO STICK AROUND AND HAVE SOME FUN WITH YOU 11 ALL. 12 FRED SMITH: I SURE KNOW ONE THING, 13 JOHN, THAT AS I SAT HERE AND THOUGHT ABOUT IT, 14 THERE IS ONE AREA WHERE THERE WILL BE CHANGE. 15 OBVIOUSLY, SINCE THE AMERICAN FREIGHTWAYS 16 SHAREOWNERS ARE SWAPPING STOCK WHEN IT'S 17 APPROPRIATE -- SOME OF THEM WILL BE TAKING CASH -- 18 BUT WHEN IT'S APPROPRIATE FOR FED-EX CORPORATION 19 SHARES. THERE WILL BE SOME CHANGES TO THE STOCK 20 PROGRAMS. THAT'S JUST A GIVEN. BUT THE OTHER 21 THINGS INSIDE AMERICAN FREIGHTWAYS WILL NOT BE 22 CHANGED AS A RESULT OF THIS ACQUISITION. JUST AS 23 SHERIDAN SAID, WE'LL TRY TO GET THE BEST IDEAS FROM 24 WHEREEVER THEY MIGHT COME, AND THEN IF TOM THINKS 11 1 THAT THEY'RE APPLICABLE FOR AMERICAN FREIGHTWAYS 2 WITH HIS MANAGEMENT TEAM, I'M SURE YOU CAN FEEL 3 FREE TO USE THEM. ON THE OTHER SIDE OF THE COIN, 4 MAYBE THERE ARE SOME THINGS THAT YOU'RE DOING THAT 5 DOUG MIGHT SEE AND WANT TO SUGGEST TO VIKING THEY 6 MIGHT USE. AND AS SHERIDAN MENTIONED, HE'S GOING 7 TO BE AROUND. SO WE'RE NOT GOING TO LOSE HIS 8 ADVISE AND COUNSEL. 9 SHERIDAN GARRISON: ONE THING THESE PEOPLE 10 HAVE DONE SO EXTREMELY WELL IN OUR COMPANY IS ADAPT 11 TO CHANGE. HERE A COUPLE OR SO YEARS AGO, WE 12 INTRODUCED THE LARGEST SINGLE RECONFIGURATION OF A 13 LINE HAUL OPERATION IN THE HISTORY OF LTL TRUCKING. 14 AND OUR PEOPLE WENT RIGHT ALONG. OF COURSE, WE HAD 15 A HICCUP OR TWO, BUT MY GOODNESS, PEOPLE WENT 16 ALONG, SUPPORTED IT, WORKED THEIR TAILS OFF TO GET 17 IT IN PLACE. AND TODAY IT'S WHAT WE CALL AMERICAN 18 FLYER. AND IT'S REALLY A GREAT SYSTEM. BUT WE 19 COULDN'T HAVE DONE IT IF PEOPLE HADN'T BEEN WILLING 20 TO CHANGE. YOU KNOW, WE DON'T LIKE TO WAKE UP IN A 21 NEW WORLD EVERYDAY. WE LIKE TO HAVE SOME DEGREE OF 22 PREDICTABILITY ABOUT OUR JOBS. I THINK WE 23 UNDERSTAND THAT IF WE'RE TO GROW AND PROSPER AND BE 24 THE KIND OF COMPANY WE SHOULD BE FOR OUR 12 1 SHAREHOLDERS, FOR OUR PEOPLE, OUR FAMILIES AND WHAT 2 HAVE YOU, WE WILL HAVE TO CHANGE. SO WE'RE NOT 3 AGAINST CHANGE. WE'RE IN FAVOR OF IT. 4 SPEAKER: I'M PAT BROWN, DIRECTOR OF 5 PROPERTIES AND CORPORATE ARCHITECT, NEW 6 CONSTRUCTION. IN REVIEWING THE SERVICE MAP THAT 7 VIKING HAS, OBVIOUSLY, THERE IS ABOUT A HANDFUL OF 8 FACILITIES THAT KIND OF OVERLAP AND PLAY AGAINST 9 EACH OTHER. HOW SOON DO YOU BELIEVE OR DO YOU 10 THINK THAT YOU WILL BEGIN LOOKING AT THOSE 11 OPERATIONS? 12 FRED SMITH: I THINK THAT'S PROBABLY -- 13 DOUG AND TOM, MAYBE YOU COULD ANSWER. 14 TOM GARRISON: AS WE DISCUSSED EARLIER, 15 FOR THIS POINT IN TIME, AMERICAN FREIGHTWAYS AND 16 VIKING ARE SISTER COMPANIES THAT CONTINUE TO BE 17 OPERATED COMPLETELY SEPARATELY. WE EXPECT IN THESE 18 MARKETS WHERE THERE IS OVERLAP, THAT THERE WILL BE 19 GROWTH OCCUR AS WE DO START EXCHANGING FREIGHTS AND 20 WE DO. AND IN THE LONG RUN, IF WE DO DO ANYTHING 21 WITH THE COMPANY AS FAR AS MERGING THEM CLOSER 22 TOGETHER, WE'LL LOOK AT THAT AT THAT POINT IN TIME. 23 AGAIN, GROWTH WOULD BE SUCH THAT THERE WOULD NOT BE 24 ANY LOSS OF PEOPLE, ANY REDUCTION IN WORK FORCE OR 13 1 ANYTHING LIKE THAT. IT WOULD ACTUALLY CREATE MORE 2 OPPORTUNITY BECAUSE OF THE FACT THAT WE COULD PICK 3 UP AND DELIVER TO BOTH WEST COAST AND EAST COAST 4 AND REGIONAL FREIGHT FROM THOSE SAME AREAS. SO 5 ACTUALLY IT WOULD DO NOTHING BUT INCREASE THE 6 PROFITABILITY OF THE OPERATIONS. BUT THAT WILL BE 7 QUITE SOME TIME DOWN THE ROAD IF THAT'S EVEN 8 CONSIDERED. 9 JOHN SHERMAN: EXCELLENT QUESTION. WE 10 HAVE A QUESTION HERE. 11 FRED SMITH: STEVE GRIFFITH, PRICING 12 RESEARCH. DOES THE STRATEGY INCLUDE THE 13 ACQUISITION OF A TRUCK LOAD CARRIER? 14 SPEAKER: WELL, YOU KNOW, STEVE, 15 WE'LL LOOK AT ANYTHING. HAVING SAID THAT THE, 16 TRUCKLOAD BUSINESS IS VERY DIFFICULT TO 17 DIFFERENTIATE ONE CARRIER FROM ANOTHER. I THINK 18 THE LARGEST MARKET SHARE IN THE TRUCKLOAD BUSINESS 19 IS A COUPLE OF PERCENTAGE POINTS, MAYBE A LITTLE 20 BIT MORE. THAT'S SCHNEIDER. MOST OF THE BUSINESS 21 REMAINS IN THE HANDS OF RELATIVELY SMALL ENTITIES. 22 THERE AREN'T MANY ECONOMIES OF SCALE IN THE 23 TRUCKLOAD BUSINESS. IN FACT, IF YOU STUDY THEM, IT 24 WOULD APPEAR IN MOST CASES THAT THEY'RE 14 1 DISECONOMIES OF SCALE. AS THEY GET BIGGER, THEIR 2 OVERHEAD GETS GREATER AND SO FORTH. THAT'S A LOT 3 DIFFERENT THAN FEDEX CORPORATION AND NOW OUR THREE 4 WONDERFUL NETWORKS. WE HAVE OUR EXPRESS NETWORK, 5 NORTH AMERICAN AND WORLDWIDE. WE HAVE OUR GROUND 6 PACKAGE NETWORK THROUGHOUT NORTH AMERICA. NOW 7 WE'VE GOT THIS WONDERFUL REGIONAL LTL FREIGHT 8 SYSTEM THAT COVERS VIRTUALLY THE ENTIRE COUNTRY. 9 AND WE INTEND TO BE NOT A TWO OR THREE PERCENT 10 MARKET SHAREHOLDER IN THE LTL BUSINESS. WE WANT TO 11 DOMINATE THIS BUSINESS. WE WANT TO BE CLEARLY THE 12 NUMBER ONE ENTITY AND WE CAN BE. I'M VERY 13 CONFIDENT OF THAT. I KNOW SHERIDAN FEELS THAT WAY 14 AND TOM AND DOUG FEEL THAT WAY. I DON'T KNOW THAT 15 THAT OPPORTUNITY EXISTS IN THE TRUCKLOAD BUSINESS. 16 WHAT DO YOU THINK? DO YOU AGREE WITH THAT? 17 STEVE GRIFFITH: IT'S A VERY RISKY 18 BUSINESS. AND THE OTHER QUESTION, DO WE EXPECT -- 19 ARE THERE ANY EXPECTATIONS THAT UPS WILL DO A 20 SIMILAR MOVE AND GET INTO THE LTL BUSINESS? 21 FRED SMITH: WELL, I THINK THAT UPS 22 WILL BE SURPRISED BY THIS. I THINK UPS 23 UNDERSTANDS, JUST AS I UNDERSTAND AND AS SHERIDAN 24 UNDERSTOOD AND OUR SENIOR MANAGEMENT TEAM 15 1 UNDERSTANDS, THAT WHAT CUSTOMERS ARE LOOKING FOR 2 TODAY ARE TRANSPORTATION COMPANIES THAT CAN SOLVE A 3 BROAD ARRAY OF THEIR PROBLEMS. I'VE BEEN IN THE 4 BUSINESS A LONG TIME, SHERIDAN EVEN LONGER THAN I 5 HAVE. AND BACK WHEN THE INDUSTRY WAS REGULATED AND 6 WHAT HAVE YOU, THERE WERE VERY CLEAR DISTINCTIONS 7 IN EVERYBODY'S MIND. YOU KNOW, YOU HAVE LTL AND 8 THEY WERE IN ONE PART OF THE TRAFFIC MANAGEMENT 9 UNIT, AND THEN YOU HAD THE PACKAGE UNIT OVER HERE. 10 AND INTERNATIONAL, BOY, THAT WAS SOMETHING THAT WAS 11 JUST SO ESOTERIC THAT NOBODY COULD HARDLY TALK TO 12 THOSE PEOPLE. WELL, MOST OF THE COMPANIES TODAY 13 THAT ARE THE REAL GROWTH ENGINES OF THE ECONOMY, 14 THEY DIDN'T EVEN EXIST WHEN THERE WAS A REGULATED 15 TRANSPORTATION BUSINESS. THEY DON'T MAKE THOSE 16 DISTINCTIONS. THEY DON'T CARE THAT HISTORICALLY UPS 17 ONLY CARRIED PACKAGES AND CF CARRIED FREIGHT AND 18 THIS, THAT AND THE OTHER. WHAT THEY WANT IS 19 SOMEBODY TO COME IN AND SOLVE THEIR PROBLEM. THEY 20 WANT TO MOVE SOME PALLETS OF FREIGHT FROM TEXAS TO 21 THE ATLANTA AREA OR THE BOSTON AREA AND THEN HAVE 22 THEM BROKEN APART AND INDIVIDUAL PACKAGES DELIVERED 23 TO INDIVIDUAL STORES. THINGS OF THAT NATURE WHERE THERE 24 IS NO INTERMEDIATE DISTRIBUTION CENTER. SO I'M 16 1 VERY CONFIDENT THAT THERE ARE GOING TO BE 2 OPPORTUNITIES FOR OUR OPERATING COMPANIES TO OFFER 3 JOINT PRODUCTS THAT ARE STITCHED TOGETHER BY A 4 COMMON INFORMATION ARCHITECTURE THAT WE CAN PUT 5 RIGHT INTO OUR SHIPPERS SHIPPING LOCATIONS AND INTO 6 THEIR, YOU KNOW, FINANCIAL SYSTEMS AND SO FORTH. 7 AND THAT'S WHAT'S SO EXCITING ABOUT THIS. NOW, 8 THAT'S NOT GOING TO BE LOST ON UPS. THEY ARE SMART 9 PEOPLE DOWN THERE, AND THEY'RE ABLE COMPETITORS. 10 NOW, HOW THEY RESPOND TO THIS, I DON'T KNOW. BUT 11 THEY KNOW WHAT WHAT WE KNOW AND THEY WILL TRY TO 12 RESPOND TO IT. WE KNOW, FOR INSTANCE, THAT UPS 13 TODAY HAS A MAJOR HIRING EFFORT UNDERWAY FOR LTL 14 SPECIALISTS. AND WHAT THEY WANT TO DO IS TO GET 15 PEOPLE TO BREAK UP THEIR LTL SHIPMENTS INTO 16 HUNDRED-WEIGHT SHIPMENTS. WELL, WHEN I TALK TO 17 CUSTOMERS -- AND THIS IS WHY I WAS SUCH A PEST WITH 18 SHERIDAN OVER THIS PERIOD OF TIME -- AS I TALK TO 19 CUSTOMERS, THAT'S NOT WHAT THEY WANT TO DO. WHAT 20 THEY WANT TO DO IS JUST WHAT I DESCRIBED. THEY 21 WANT TO MOVE IT TO A FREIGHT SYSTEM, AND THEN IF 22 IT'S NEEDS TO BE BROKEN INTO INDIVIDUAL PACKAGES, 23 THEN YOU WORRY ABOUT HOW TO GET THAT DONE. THEY 24 DON'T WANT TO BREAK OPEN THEIR PALLETS AND THEIR 17 1 DC'S AND HAVE ALL OF THE PROBLEMS OF, YOU KNOW, ONE 2 OF FIVE BEING MISSING AND THE SHIPMENT INTEGRITY 3 ISSUES THAT COME WITH MULTIPLE PIECE LOOSE 4 SHIPMENTS. SO I THINK WE'RE GOING TO BE ABLE TO 5 PUT SOME THINGS TOGETHER IN THAT REGARD. THEY'RE 6 GOING TO BE VERY EXCITING AND THEY'RE GOING TO BE 7 EXACTLY WHAT OUR CUSTOMERS WANT TO SEE FROM THE 8 FED-EX FAMILY OF COMPANIES. 9 JOHN SHERMAN: THANK YOU. ANYONE ELSE? 10 RIGHT HERE. 11 SPEAKER: I'M VICE-PRESIDENT OF 12 HUMAN RESOURCES. AND ACTUALLY THE QUESTION I HAVE 13 IS FROM OUR ASSOCIATES. DUE TO FIELDING SOME CALLS 14 THIS MORNING, THERE SEEMS TO BE A MAJOR QUESTION IN 15 THAT IS FEDEX AFFILIATED WITH A UNION? PRIMARILY, 16 THE TEAMSTERS? AND WHAT DOES IT DO WITH THEIR 17 DESIRE TO REMAIN UNION FREE? 18 FRED SMITH: WELL, FEDEX CORPORATION 19 HAS A VERY SIMILAR CULTURE TO THAT OF AMERICAN 20 FREIGHTWAYS. WE WANT TO TREAT OUR ASSOCIATES AND 21 EMPLOYEES AND CONTRACTORS IN SUCH A WAY THAT THEY 22 DON'T FEEL THAT THEY NEED A THIRD PARTY TO GET 23 IN BETWEEN THEM AND THE MANAGEMENT TEAM IN SERVING 24 CUSTOMER NEEDS. THAT DOESN'T MEAN WE ARE 18 1 ANTI-UNION. IT DOESN'T MEAN THAT WE'RE IN ANY WAY 2 AGAINST PEOPLE'S RIGHT TO JOIN A LABOR UNION IF 3 THAT'S WHAT THEY WANT, BUT WE BELIEVE THAT WE 4 SHOULD RUN OUR COMPANY SO THAT PEOPLE DON'T FEEL 5 THAT THEY HAVE TO DO THAT. SO OUR PHILOSOPHIES ARE 6 ABSOLUTELY THE SAME AS AMERICAN FREIGHTWAYS. WE DO 7 NOT HAVE THE TEAMSTERS REPRESENTING ANY FEDEX 8 EMPLOYEES AT THIS POINT. WE DO HAVE THE FEDEX 9 PILOTS ASSOCIATION, WHICH IN NORTH AMERICA IS THE 10 ONLY UNION WITHIN THE FEDEX FAMILY. OFF-SHORE, IN 11 CERTAIN LOCATIONS, THERE ARE UNIONIZED EMPLOYEES 12 AND SOME PLACES BECAUSE IT'S A MATTER OF LAW. BUT 13 THE VAST MAJORITY OF FEDEX EXPRESS EMPLOYEES, ALL 14 OF THE EMPLOYEES IN THE UNITED STATES OTHER THAN 15 THE PILOTS ARE NON-UNION. THE FEDEX GROUND UNIT 16 IS NON-UNION, AND THE PICK-UP AND DELIVERY IS 17 ACTUALLY DONE BY INDEPENDENT CONTRACTORS. 18 JOHN SHERMAN: EXCELLENT QUESTION. 19 GREG SATTERFIELD: I'M VICE-PRESIDENT OF 20 ACCOUNTING. OF COURSE, MANY AF EMPLOYEES ARE ALSO 21 SHAREHOLDERS. AND AS SUCH, THEY WILL HAVE AN 22 OPPORTUNITY TO EITHER RECEIVE CASH OR EXCHANGE 23 THEIR AF SHARES FOR FED-EX SHARES. AND I GUESS I 24 WAS JUST CURIOUS WHAT TYPE OF REACTION DO YOU 19 1 EXPECT FROM THIS TRANSACTION IN THE MARKETPLACE? 2 WHAT TYPE OF FEEDBACK MAY YOU HAVE RECIEVED ALREADY 3 FROM THE INVESTMENT COMMUNITY AND FROM ANALYSTS? 4 FRED SMITH: WELL, THIS MORNING, WE HAD 5 A CONFERENCE CALL WITH THE ANALYST COMMUNITY. AND 6 ON THE CONFERENCE CALL, I WAS ON IT, SHERIDAN WAS 7 ON IT, DOUG, TOM AND OUR CHIEF FINANCIAL OFFICER, 8 ALAN GRAF. AND I'LL ASK THEM TO SHARE ANY 9 IMPRESSIONS THAT THEY HAVE, BUT MINE WAS THAT THE 10 FOLKS GOT IT, THEY UNDERSTOOD WHAT WE WERE TRYING 11 TO DO. I THINK PARTICULARLY HELPFUL WAS THE FACT 12 THAT IN ADDITION TO THE CONFERENCE CALL, WE 13 SIMULTANEOUSLY SENT THE INFORMATION OUT ON OUR WEB 14 SITE. AND ON THE WEB SITE, THERE WAS THIS MAP THAT 15 SHOWED THE AMERICAN FREIGHTWAYS SYSTEM IN RED AND 16 THE VIKING SYSTEM IN BLUE. AND, OF COURSE, AS YOU KNOW, 17 THERE'S ONLY A COUPLE OF STATES WHERE THERE'S ANY 18 OVERLAP WHATSOEVER. SO IT INSTANTLY GOT ACROSS TO 19 PEOPLE THAT THIS WAS VERY, VERY COMPLIMENTARY. AND 20 I THINK THEY ALSO UNDERSTAND THE FED-EX COMPETE 21 COLLECTIVELY, OPERATE INDEPENDENTLY STRATEGY AND 22 OUR EFFORTS TO OFFER A BROADER RANGE OF SERVICES TO 23 OUR CUSTOMER BASE. SO THE BEST INDICATION IS THAT 24 AMERICAN FREIGHTWAYS' STOCK TODAY IS, YOU KNOW, UP 20 1 TEN BUCKS. AND, I THINK, FED-EX CORPORATION IS 2 BASICALLY HANGING IN THERE. IT'S NOT UNUSUAL WHEN 3 A COMPANY ANNOUNCES AN ACQUISITION, QUITE FRANKLY, 4 THAT DUE TO UNCERTAINTY, THAT THE ACQUIRING 5 COMPANY'S STOCK GOES DOWN. AND I DON'T KNOW WHERE 6 FEDEX CORPORATION'S SELLING AT THE MOMENT, BUT I 7 KNOW THAT DURING THE CONFERENCE CALL, AT LEAST, IT 8 DIDN'T APPEAR THAT THERE WAS ANYBODY TRADING A LOT 9 OF STOCK. SHERIDAN, WHAT DID YOU THINK ABOUT THE 10 CALL? 11 SHERMAN GARRISON: I THOUGHT IT WAS A VERY 12 GOOD CALL. I HEARD SEVERAL COMPLIMENTARY REMARKS, 13 AND I'VE HAD SOME SINCE THEN FROM ANALYSTS. AND 14 THEY WERE VERY, VERY MUCH IN FAVOR OF THE 15 COMBINATION OF THE TWO. IT REALLY LOOKS GOOD IN 16 THE INVESTMENT COMMUNITY. 17 FRED SMITH: I THINK ONE OF THE REASONS 18 FOR THAT IS THEY HAVE WATCHED WHAT WE DID WHEN WE 19 ACQUIRED RPS. WE'VE GOTTEN ALL OF THE BENEFITS 20 FROM IT AND THERE HASN'T BEEN ANY CARNAGE AND, YOU 21 KNOW, INTERNAL PROBLEMS THAT HAVE PREOCCUPIED THE 22 MANAGEMENT AND THE INTERNAL TEAMS, SO THERE IS A 23 TRACK RECORD OF DOING WHAT WE'RE DOING. AND THAT, 24 I THINK, HELPS THE CONFIDENCE LEVEL A LOT. THAT'S 21 1 MY VIEW OF IT. 2 SHERIDAN GARRISON: ONE THING THAT IMPRESSES 3 ME ABOUT FEDEX AND VIKING BOTH IS THEIR SAFETY 4 PROGRAMS. THEY'RE VERY, VERY CONCERNED ABOUT THE 5 WELFARE OF THE PEOPLE THAT WORK IN THEIR COMPANIES 6 AND -- AS WE ARE, TOO, OF COURSE. BUT THEY'RE 7 SAFE OPERATING COMPANIES AND THAT MAKES A TREMENDOUS 8 DIFFERENCE. AND THAT ATTITUDE COMES DOWN FROM THE 9 TOP AND WORKS IT'S WAY ALL THE WAY DOWN AND BACK 10 UP. I'M IMPRESSED BY IT. 11 FRED SMITH: I WOULD JUST ADD TO THAT, 12 JOHN, THE FEDEX CORPORATION MISSION STATEMENT, 13 WHICH IS VERY SHORT, AND WE'LL MAKE SURE THAT IT 14 GETS OUT. IT'S IN OUR LITTLE CORPORATE OPERATING 15 MANUAL. BUT THAT'S RIGHT IN THE CORPORATE MISSION 16 STATEMENT, THAT SAFETY WILL BE THE NUMBER ONE 17 CONSIDERATION IN EVERYTHING THAT WE DO. YOU'VE GOT 18 TO RUN A SAFE AND SECURE OPERATION, THEN YOU CAN 19 WORRY ABOUT EVERYTHING ELSE. BUT THOSE ARE RIGHT 20 AT THE TOP OF THE LIST. 21 JOHN SHERMAN: SPEAKING OF WORDS AND 22 STATEMENTS TO WORK BY AND LIVE BY -- AND TOM 23 REPEATED OUR SIX BUSINESS PRINCIPLES JUST A LITTLE 24 WHILE AGO. TAKE CARE OF OUR CUSTOMERS, TAKE CARE 22 1 OF OUR PEOPLE, HONOR OUR COMMITMENTS, WORK HARD, 2 WORK SMART, WORK SAFELY, WORK TOGETHER, MAKE THE 3 MOST OF RESOURCES AND HAVE FUN. CULTURALLY, YOU 4 MENTIONED HOW SIMILAR WE ARE. HOW DO THOSE WORDS 5 FIT TO GIVE THESE PEOPLE SOME REAL COMFORT ABOUT 6 BEING PART OF THE FEDEX FAMILY? 7 FRED SMITH: WELL, AS FAR AS HAVING 8 FUN, I MEAN, YOU'VE GOT TO RECOGNIZE THAT ANY 9 COMPANY THAT PUTS A COMMERCIAL ON TELEVISION WITH A 10 CROCODILE MAN, YOU KNOW, HAS GOT TO HAVE A SENSE OF 11 HUMOR AND LIKES TO HAVE FUN. I CAN ASSURE YOU THAT 12 WE PUT A HIGH PREMIUM ON HAVING A LOT OF FUN. I 13 CANNOT TELL YOU HOW SIMILAR THE CORPORATE CULTURES 14 ARE. I MEAN, SHERIDAN AND I HAVE KNOWN EACH OTHER 15 A COUPLE OF YEARS NOW. IT'S LIKE WE'VE KNOWN EACH 16 OTHER FOR 30 YEARS. I'VE KNOWN SOME OF YOUR BOARD 17 MEMBERS FOR YEARS. I'M AN ENORMOUS ADMIRER OF 18 CONGRESSMAN JOHN PAUL HAMMERSCMIDT. I THINK THAT 19 THE VALUES ON PEOPLE ARE NOT JUST BECAUSE SHERIDAN 20 AND I FEEL THAT WAY INDIVIDUALLY, ALTHOUGH WE BOTH 21 DO. IT'S GOOD, HARD-HEADED BUSINESS SENSE IN THE 22 SERVICE INDUSTRY. YOU CANNOT TAKE CARE OF 23 THOUSANDS OR MILLIONS OF DIFFERENT CUSTOMERS WITH 24 THE KIND OF SERVICE EXPECTATIONS THAT PEOPLE HAVE 23 1 TODAY UNLESS YOU'VE GOT MOTIVATED, COMMITTED 2 EMPLOYEES. SO THE CULTURES ARE THE SAME BECAUSE 3 THEY START AT THE TOP, BUT EQUALLY AND MORE 4 IMPORTANT IN THE YEARS TO COME BECAUSE IT'S CLEAR 5 THAT THAT'S THE SMARTEST WAY TO RUN BUSINESSES LIKE 6 THESE. AND I KNOW HOW DOUG FEELS ABOUT THINGS AND 7 TOM FEELS ABOUT THESE THINGS. AND I THINK THAT THE 8 VALUES THAT TOM ARTICULATED ARE ACTUALLY STATED 9 SOMEWHAT DIFFERENTLY IN THE MISSION STATEMENT OF 10 FED-EX CORPORATION. AND FOR THAT MATTER, ALL OF 11 OUR OTHER OPERATING UNITS AS WELL. 12 SHERIDAN GARRISON: WHEN I THINK ABOUT PEOPLE 13 OF AMERICAN FREIGHTWAYS, I THINK ABOUT JERRY JONES 14 IN ALL OF HIS WISDOM, WHEN WE WERE STARTING OUR 15 COMPANY. ABOUT THE SECOND OR THIRD YEAR AT THE 16 ANNUAL MEETING, HE HAD PICKED THE SPEAKER. AND IT 17 WAS OBVIOUSLY THE WORST SPEAKER I EVER HEARD IN ALL 18 MY LIFE. OBVIOUSLY, HE DID NOT RESEARCH HIM. THIS 19 GUY CAME IN AND HE HAD US ALL DOWN -- 20 ABSOLUTELY, WE WERE ALL DOWN LIKE THIS. HE WAS 21 THE WORST MOTIVATOR. IF HE WAS A MOTIVATOR, I 22 DON'T KNOW WHAT. BUT IT WAS THE WORST PERFORMANCE 23 I'VE EVER SEEN. WE GOT TOGETHER AT HALF-TIME, OUR 24 GROUP DID, AND WE SAID, WE'RE GOING TO SEE IF WE CAN CHEER THIS 24 1 FELLOW UP. AND EVERY TIME HE'D SAY SOMETHING, 2 INSTEAD OF US LOOKING DOWN LIKE HE DID, WE WOULD 3 CHEER. IN A MATTER OF TEN MINUTES, WE HAD HIM 4 BEING TO MOST POSTITIVE SPEAKER YOU EVER HEARD. 5 THIS IS THE KIND OF PEOPLE THAT MAKE UP THIS 6 CORPORATION. WHEN THE GOING GETS TOUGH, WE JUST 7 GET A LITTLE BIT TOUGHER AND WE GRIN AND WE GO 8 AFTER IT. WE HAVE FUN. AND WHEN IT'S ALL OVER 9 WITH, WE'RE STILL ALL FRIENDS AND WE'RE STILL GOING 10 FOR THE FUTURE AND THE LONG TERM. AND WE KNOW WHAT 11 IT'S LIKE TO HAVE FUN AND AT THE SAME TIME, TO 12 BUILD A COMPANY, BUILD PEOPLE UP, GIVE AN 13 OPPORTUNITY TO PEOPLE -- MOST -- I GUESS, FROM WHAT 14 I KNOW, THE MOST GRATIFYING THING ABOUT MY JOB IS 15 TO SEE PEOPLE GROW AS INDIVIDUALS. I'VE SEEN SO 16 MUCH OF THAT IN THIS COMPANY. AND I KNOW THAT WHEN 17 WE GO WITH FED-EX, WE'RE GOING TO SEE THE SAME 18 THING. IT'S GOING TO BE REPEATED ALL OVER AGAIN. 19 AND THAT MEANS A LOT TO ME. 20 FRED SMITH: WE DON'T HAVE ANY PLANS 21 AT THE MOMENT TO DO ANYTHING ON BRANDING. AMERICAN 22 FREIGHTWAYS HAS A GREAT BRAND. VIKING HAS A GREAT 23 BRAND. WE'LL DO A LOT OF CUSTOMER RESEARCH AND 24 MAKE SURE THAT PEOPLE KNOW THAT THERE'S AN 25 1 AFFILIATION AT THE VERY LEAST. BUT THERE WON'T BE 2 ANYTHING IN THE SHORT RUN ON THAT. 3 FRED SMITH: I MIGHT WANT TO SAY JUST 4 ONE OTHER THING, JOHN. WE TALKED A LITTLE 5 EARLIER -- SHERIDAN DID -- ABOUT THE AMERICAN 6 FREIGHTWAYS RE-ENGINEERING OF THE LINE HAUL SYSTEM 7 WHEN YOU PUT IN THE AMERICAN FLYER SYSTEM. I 8 STUDIED THAT INTENTLY. I HAVE TO TELL YOU, IT WAS 9 ONE OF THE MOST REMARKABLE THINGS I'VE EVER SEEN IN 10 THE HISTORY OF TRANSPORTATION. IT'S THE 11 EQUIVALENT, IN THE TRANSPORTATION INDUSTRY, OF WHAT 12 PATTON DID DURING THE BATTLE OF THE BULGE, TURNING 13 THE WHOLE ARMY AROUND AND GOING UP AND SAVING THE 14 AIRBORNE. IT WAS INCREDIBLE WHAT YOU WERE ABLE 15 TO DO. AND WHEN YOU CAME OUT OF IT, YOUR SYSTEM 16 WAS SO ON POINT WITH WHAT THE CUSTOMERS WANT. AND 17 DOUG DUNCAN AND I TALKED ABOUT THAT ON NUMEROUS 18 OCCASIONS. IT WAS JUST A REAL CREDIT TO THE 19 ORGANIZATION IN TERMS OF YOUR ABILITY TO RECOGNIZE 20 WHAT THE MARKET WANTED AND THEN CHANGE AND TO MEET 21 IT. IT WAS FROM THAT MOMENT FORWARD THAT I TOLD MY 22 TEAMMATES ON THE FEDEX EXCOM, WHICH ARE OUR CHIEF 23 FINANCIAL ADVISOR, ALAN GRAF, AND KEN MASTERSON 24 AND THE HEAD OF MARKETING AND OUR CHIEF INFORMATION 26 1 OFFICER. THAT'S WHAT WE CALL ARE EXCOM. I 2 SAID THIS IS ONE OF THE GREAT TRANSPORTATION 3 COMPANIES IN THE HISTORY OF THE WORLD AND WE'VE GOT 4 TO SEE IF WE CAN'T FIGURE OUT SOME WAY WE CAN HOOK 5 UP WITH THESE FOLKS. THAT'S WHEN I STARTED, YOU 6 KNOW, COMING TO SEE SHERIDAN AND DEVELOPING A 7 RELATIONSHIP. MY HAT'S OFF TO YOU FOR WHAT YOU'RE 8 ABLE TO DO. 9 JAY KEY: JAY KEY, DIRECTOR OF 10 SAFETY. I HAD A COUPLE OF QUESTIONS THIS MORNING 11 FROM THE HOURLY ASSOCIATES QUESTIONING -- WE HAVE 12 HAD IN THE PAST FOR THEM A STOCK PURCHASE PLAN. 13 AND APPARENTLY THERE WERE SOME THINGS SAID ABOUT 14 THAT. AND THEIR QUESTION WAS, DO YOU FORESEE THAT 15 BEING SOMETHING THAT THE HOURLY ASSOCIATES AT 16 AMERICAN FREIGHTWAYS WILL HAVE, AVAILABILTY OF 17 SOMETHING LIKE THIS IN THE FUTURE? 18 FRED SMITH: WELL, FEDEX CORPORATION 19 HAS AN EMPLOYEE STOCK PURCHASE PLAN TODAY. I DON'T 20 KNOW HOW IT COMPARES WITH AMERICAN FREIGHTWAYS' 21 PLAN. MAYBE IT'S BETTER THAN THE FEDEX PLAN OR 22 WHAT HAVE YOU. I JUST DON'T KNOW. BUT EMPLOYEES 23 WILL BE ABLE TO BUY FEDEX CORPORATION SHARES 24 THROUGH PAYROLL DEDUCTION. AND JUST AS SHERIDAN 27 1 MENTIONED EARLIER, WE'LL LOOK AT WHAT YOUR PLAN WAS 2 VERSUS WHAT FEDEX CORPORATION AND MAYBE TAKE PARTS 3 OF BOTH ONES. BUT THAT WILL BE PROBABLY BE THE 4 BIGGEST SINGLE CHANGE THAT PEOPLE WILL SEE BECAUSE, 5 AGAIN, THE END OF THE DAY, AMERICAN FREIGHTWAYS' 6 SHARES LISTED SEPARATELY WILL GO AWAY AND THEY'LL 7 BE PART OF THE MUCH BIGGER FEDEX CORPORATION. BUT 8 THERE WILL BE AN EMPLOYEE STOCK PURCHASE PLAN. I 9 JUST CAN'T GIVE YOU THE DETAILS OF IT. 10 JOHN SHERMAN: THANK YOU. ANY OTHER 11 QUESTIONS THAT ANYONE HAD? GOOD QUESTIONS THOUGH. 12 GENTLEMEN, WE REALLY APPRECIATE YOUR TIME TODAY. 13 THIS HAS BEEN A GREAT EXPERIENCE. DO YOU HAVE ANY 14 PARTING WORDS FOR OUR ASSOCIATES HERE? ANYONE? 15 SHERIDAN GARRISON: LET'S GO HAUL FREIGHT. 16 17 18 19 20 21 22 23 24 Certain statements contained in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to management's views with respect to future events and financial performance and the proposed FedEx acquisition of AF. 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 and competitive conditions in the markets where FedEx operates, matching capacity to volume levels and other uncertainties detailed from time to time in press releases and filings with the SEC by FedEx and its subsidiaries. ALL AF STOCKHOLDERS SHOULD READ THE TENDER OFFER STATEMENT CONCERNING THE TENDER OFFER FOR SHARES OF AF COMMON STOCK THAT WILL BE FILED BY FEDEX CORPORATION WITH THE SEC AND MAILED TO AF STOCKHOLDERS. THE TENDER OFFER STATEMENT (INCLUDING THE OFFER TO PURCHASE, A RELATED LETTER OF TRANSMITTAL AND OTHER OFFER DOCUMENTS) WILL CONTAIN IMPORTANT INFORMATION THAT AF STOCKHOLDERS SHOULD READ CAREFULLY BEFORE MAKING ANY DECISION REGARDING TENDERING THEIR SHARES. AF stockholders will be able to obtain the tender offer statement, as well as other filings containing information about FedEx Corporation and AF, without charge, at the SEC's Internet site (http://www.sec.gov). In addition, copies of the tender offer statement and other documents filed with the SEC by FedEx Corporation may be obtained for free from FedEx by directing a request to FedEx Corporation, 942 S. Shady Grove Road, Memphis, Tennessee 38120, Attention: Investor Relations, telephone: (901) 818-7200. ALL AF STOCKHOLDERS SHOULD READ THE PROXY STATEMENT/ PROSPECTUS CONCERNING THE MERGER AND RELATED TRANSACTIONS THAT WILL BE FILED WITH THE SEC AND MAILED TO AF STOCKHOLDERS. THE PROXY STATEMENT/ PROSPECTUS WILL CONTAIN IMPORTANT INFORMATION THAT AF STOCKHOLDERS SHOULD READ CAREFULLY BEFORE MAKING ANY DECISION REGARDING THE MERGER AND RELATED TRANSACTIONS. AF stockholders will be able to obtain the proxy statement/prospectus, as well as other filings containing information about FedEx Corporation and AF without charge, at the SEC's Internet site (http://www.sec.gov). In addition, the proxy statement/prospectus and other documents filed with the SEC by AF may be obtained for free from American Freightways Corporation, 2200 Forward Drive, Harrison, Arkansas 72601, Attention: Investor Relations, telephone: (870) 741-9000. FedEx and AF and their officers and directors may be deemed to be participating in the solicitation of proxies from AF's stockholders with respect to the merger and related transactions. Information regarding the officers and directors of FedEx is included in the FedEx Proxy Statement for its 2000 Annual Meeting of Stockholders filed with the SEC on August 14, 2000. Information regarding the officers and directors of AF is included in the AF Proxy Statement for its 2000 Annual Meeting of Stockholders filed with the SEC on March 11, 2000. These documents are available free of charge at the SEC's Internet site (http://www.sec.gov) or by contacting FedEx or AF at the addresses set forth above.