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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MAY 31, 1999.
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________________
TO _________________.
COMMISSION FILE NUMBER 333-39483
FDX CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 62-1721435
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) 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) 369-3600
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
Common Stock, par value $.10 per share New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes /x/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. / /
As of August 2, 1999, 298,256,834 shares of the Registrant's Common
Stock were outstanding and the aggregate market value of the voting stock
held by non-affiliates of the Registrant (based on the closing sale price of
such stock on the New York Stock Exchange) was approximately $12,396,388,225.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal year ended
May 31, 1999 are incorporated by reference into Parts I, II and IV.
Portions of the Proxy Statement for the Annual Meeting of Stockholders
to be held September 27, 1999 are incorporated by reference into Part III.
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TABLE OF CONTENTS
PAGE
----
PART I
ITEM 1. Business....................................................... 1
ITEM 2. Properties..................................................... 17
ITEM 3. Legal Proceedings.............................................. 21
ITEM 4. Submission of Matters to a Vote of Security Holders............ 22
Executive Officers of the Registrant........................... 23
PART II
ITEM 5. Market for Registrant's Common Equity
and Related Stockholder Matters.............................. 25
ITEM 6. Selected Financial Data........................................ 25
ITEM 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition........................... 25
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk .... 25
ITEM 8. Financial Statements and Supplementary Data.................... 26
ITEM 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure....................... 26
PART III
ITEM 10. Directors and Executive Officers of the Registrant............. 26
ITEM 11. Executive Compensation......................................... 26
ITEM 12. Security Ownership of Certain Beneficial Owners
and Management............................................... 26
ITEM 13. Certain Relationships and Related Transactions................. 26
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K..................................................... 27
FINANCIAL STATEMENT SCHEDULE INDEX
Report of Independent Public Accountants on Financial Statement Schedule S-1
SCHEDULE II Valuation and Qualifying Accounts........................... S-2
EXHIBIT INDEX............................................................ E-1
PART I
ITEM 1. BUSINESS
FDX CORPORATION
INTRODUCTION
FDX Corporation ("FDX" or the "Company") was incorporated in Delaware on
October 2, 1997. The Company is a $17 billion global transportation and
logistics enterprise that offers customers a one-stop source for global
shipping, logistics and supply chain solutions. Services offered by FDX
companies include worldwide express delivery, ground small-parcel delivery,
less-than-truckload freight delivery and global logistics, supply chain
management and electronic commerce solutions. These services are offered
through a portfolio of operating companies: Federal Express Corporation, the
Company's largest subsidiary ("FedEx"), RPS, Inc. ("RPS"), Viking Freight,
Inc. ("Viking"), Roberts Express, Inc. ("Roberts Express") and Caliber
Logistics, Inc. ("Caliber Logistics"), a wholly-owned subsidiary of FDX
Global Logistics, Inc. ("FDX Global Logistics").
Each FDX company competes in a separate, well-defined segment of the
total transportation and logistics market. FedEx is the world leader in
global express distribution, offering time-certain delivery within 24-48
hours among markets that comprise more than 90 percent of the world's gross
domestic product. RPS is North America's second largest provider of
business-to-business guaranteed ground package delivery. Viking is a
less-than-truckload freight carrier operating principally in the western
United States. Roberts Express is the world's leading surface-expedited
carrier for time-critical shipments requiring special handling. FDX Global
Logistics offers complete supply chain solutions by combining worldwide
transportation, information and physical logistics services.
For financial information concerning the Company's business segments,
refer to Note 11 of Notes to Consolidated Financial Statements contained in
the Company's Annual Report to Stockholders for the fiscal year ended
May 31, 1999, which Note is incorporated herein by reference.
PURPOSE OF FDX
The purpose of FDX is to provide strategic direction to, and coordination
of, the FDX portfolio of companies. FDX believes that certain sales and
marketing activities, financial planning and reporting, legal and regulatory
compliance, communications and information systems development are functions
that are best coordinated across subsidiary lines. The Company intends to use
advanced information systems to connect the FDX companies. These aligned
information systems are being designed to make it easy and convenient for
customers to use the full range of FDX services.
FDX believes that seamless information integration is critical in order
to obtain business synergies from multiple operating units. For example, in
the Company's fiscal year ended May 31, 1999, the Company combined FedEx and
RPS domestic shipping functionality on the FDX PowerShip-Registered
Trademark- and RPS Multi-Ship-Registered Trademark- proprietary computer
networks. This permits customers to use the dedicated computer installed in
their offices and, with a few keystrokes, switch between FedEx and RPS
domestic shipping services.
The Company manages the business as a portfolio. As a result, decisions
on capital investment, expansion of delivery and information technology
networks, and service additions or enhancements are
based on achieving the highest overall return on capital. For each one of the
FDX companies, the Company's management focuses on making appropriate
investments in the technology and transportation assets necessary to optimize
FDX's earnings performance and cash flow.
FDX STRATEGY
FDX's strategy is to have focused operating companies that excel in each
segment of the transportation and logistics marketplace, from price-sensitive
to service-sensitive, and to create synergies across companies through
coordinated sales and marketing programs enhanced by state-of-the-art
information technology. FDX believes that operating independent delivery
networks, each focused on its own respective markets, results in optimal
service quality, reliability and profitability from each of the Company's
businesses. All of the FDX subsidiaries are free to focus exclusively on the
market segments in which they have the most expertise.
The Company believes that its strategy is proving to be successful. In
the Company's fiscal year ended May 31, 1999, the Company's two largest
operating companies--FedEx and RPS--each set new records for service
levels and financial results. Service levels improved due to the fact that
each company concentrated on providing its customers with the best service
for its particular market segment. Profitability improved, in part, because
of the Company's ability to steer traffic to the operating company which can
best provide the required service on the most cost-efficient basis.
The Company has selected its strategy in order to capitalize on four
trends shaping the emerging "Network Economy":
GLOBAL SOURCING AND SELLING
As the world's economy becomes more fully integrated, and as barriers
and borders to trade continue to decrease, companies are sourcing and selling
globally. They obtain components from Southeast Asia, assemble them in Latin
America and sell them in the United States. This, in turn,
has opened multiple legs of transportation on both the in-bound "sourcing"
side as well as the out-bound "selling" side. With customers in 210
countries, FDX is a major facilitator in this supply chain because of its
global reach, express services and information capabilities.
RAPID GROWTH OF HIGH-TECH AND HIGH-VALUE-ADDED BUSINESSES
FDX believes that the high-tech and high-value-added goods sector will
continue to experience strong growth as a percentage of total economic
activity. Information technology alone now contributes more than one-third of
real economic growth in the United States. In 1997, the high-tech electronics
industry was both the largest U.S. exporter and the largest U.S. importer.
U.S. exports of high-tech goods has risen 96% since 1990. The
high-value-added sector, however, is broader, including pharmaceuticals,
automotive, electronics, aviation and other goods with high value per pound.
ACCELERATION OF THE SUPPLY CHAIN
The third major trend affecting the "Network Economy" is the increase
of fast-cycle logistics. Companies of varying sizes, particularly in
industries experiencing rapid obsolescence, are increasing productivity,
efficiency and profitability through sharply increased supply chain velocity.
A supply
2
chain is the series of transportation and information exchanges required to
convert raw materials into finished, delivered goods. Managing inventory at
rest is unprofitable. Warehouses, for example, are expensive ways to ensure
the availability of goods. FDX believes in substituting real-time information
to manage inventory in motion, thereby enabling customers to reduce overhead
and obsolescence while speeding time-to-market.
To take advantage of the move toward faster, more efficient supply
chains, in October 1998, the Company created FDX Global Logistics. The
Company believes that the future of logistics will not be in brick-and-mortar
warehouses, but in providing information-intensive services that increase the
value, visibility and velocity of the goods in customers' supply chains.
RAPID GROWTH OF BUSINESS-TO-BUSINESS E-COMMERCE
While there has been significant press recently about the expected
growth of consumer purchases over the Internet, the business-to-business
e-commerce marketplace is substantially larger than the business-to-consumer
e-commerce marketplace. Business-to-business e-commerce is estimated to be
over $100 billion in sales in 1999 and to exceed the trillion sales mark by
2003. Computers and electronics--already two of the Company's largest
customer segments--account for almost half of this category, and supply
chains are increasingly moving online. While FDX expects business-to-business
e-commerce to remain the largest e-commerce segment, the Company is also
leveraging the strength of the FDX portfolio in the business-to-consumer
market. The Company plans to continue handling the "time-sensitive" side of
residential deliveries, particularly for higher-value goods, through its
FedEx subsidiary. In addition, RPS is testing a new "service-sensitive"
residential delivery service to expand the Company's mix of transportation
and logistics solutions and to open opportunities for additional Internet
retail business. Depending on the results of the Pittsburgh, Pennsylvania
metropolitan-area test program, FDX believes it can roll out a
business-to-consumer RPS delivery service by Spring 2000. See "RPS,
Inc.--Recent Developments."
While the "Network Economy" is global, high-tech, fast-cycle and
networked through e-commerce, and FDX management believes that the Company's
global portfolio of services, technology and information is well configured
to the dynamics of this new economy, the Company's actual results may vary
depending upon such important factors as the impact of competitive pricing
changes, customer responses to yield management initiatives, changing
customer demand patterns, the timing and extent of network refinement,
actions by the Company's competitors, including capacity fluctuations,
regulatory conditions for aviation rights, and changing U.S. domestic and
international economic conditions.
3
The following describes in more detail the business of each of the five FDX
operating companies:
FEDERAL EXPRESS CORPORATION
INTRODUCTION
FedEx began operations in 1973. On January 27, 1998, FedEx became a
wholly-owned subsidiary of the Company. FedEx invented express distribution
in 1973 and remains the industry leader, providing rapid, reliable,
time-definite delivery of documents, packages and freight to 210 countries.
FedEx connects areas of the world that generate 90 percent of the world's
gross domestic product through door-to-door, customs-cleared service, with a
money-back guarantee. FedEx's extensive air route authorities and
transportation infrastructure, combined with its use of leading-edge
information technologies, make FedEx the world's largest express-distribution
company, providing fast, reliable service for over three million shipments
each business day. FedEx employs more than 141,000 employees and has more
than 44,000 drop-off locations, 637 aircraft and 46,000 vehicles in its
integrated global network.
FedEx is ISO 9001 certified for its global operations. ISO 9001 is
currently the most rigorous international standard for Quality Management and
Assurance. FedEx is the only express transportation company to receive
worldwide certification of its systems. The ISO 9000 quality standards were
developed by the International Organization for Standardization in Geneva,
Switzerland to promote and facilitate international trade. More than 90
countries, including European Union members, the United States and Japan,
recognize ISO 9000.
RECENT DEVELOPMENTS
NETSCAPE PORTAL AGREEMENT
In April 1999, FDX and Netscape-Registered Trademark- Communications
Corporation, a subsidiary of America Online, Inc., established a multi-year
strategic agreement to offer businesses and consumers a convenient one-stop
portfolio of delivery services on Netscape's fast-growing Internet portal,
Netscape Netcenter-TM-. FedEx announced that it will license Netscape's
customized Internet portal service, Custom Netcenter-TM-, to create a FedEx
Internet package shipping portal. The alliance benefits businesses and
consumers by simplifying e-commerce transactions with streamlined shipping
for online purchases, personalized package status tracking and the future
integration of these features with the Netscape Communicator-TM- Internet
browser. The companies offer these features through a new Netcenter service
called the Delivery Center and through a FedEx portal customized to user
requirements. The agreement showcases the strength of FedEx's shipping
services and related information to the 13 million Netcenter users. Among the
services that are expected to be available in 1999-2000:
- FEDEX SHIPPING SERVICES FOR ALL NETCENTER E-COMMERCE TRANSACTIONS--
FedEx will be the pre-selected carrier on Netscape-Registered
Trademark- Store for purchases made on the Netcenter-Registered
Trademark- General Store and Software Depot
- FEDEX CUSTOM NETCENTER--this shipping-focused, FedEx Internet
portal will be built using Netscape's Custom Netcenter-TM- service
and will combine Netcenter content with FedEx services
4
- DELIVERY CENTER-TM- -- a standalone program accessible from the
Netcenter portal where customers can track packages, ship FedEx
packages online with FedEx interNetShip-Registered Trademark-, get
shipping rates, locate package drop off points and access the latest
information on FedEx and RPS services
- MY NETSCAPE DELIVERY CHANNEL-TM- -- to enable customers that
customize their personal start page on the web to include FedEx and
RPS services they use often such as tracking, FedEx interNetShip,
rate finder and drop-off locator
- NETSCAPE ADDRESS BOOK-TM- INTEGRATION -- this new service will be
available as part of the Netscape Contact address book and will allow
consumers to easily print shipping labels from their address book
contact lists
The first Netscape services scheduled to be available are expected to be
the Delivery Center and the My Netscape Delivery Channel. Netscape, Netscape
Navigator and the Netscape "N" and Ship's Wheel logos are registered
trademarks of Netscape Communications Corporation in the United States and in
other countries. Netscape Netcenter, Netscape Custom Netcenter, Netscape
Communicator, Netscape Delivery Center, Netcenter General Store, Netcenter
Software Depot, My Netscape Delivery Channel and Netscape Address Book are
also trademarks of Netscape Communications Corporation, which may be
registered in other countries.
FEDEX U.S. EXPRESS FREIGHT SERVICES
In March 1999, FedEx expanded its express freight services offering to
handle the needs of the time-definite freight market, which is growing at
almost twice the rate of the non-time-definite market. FedEx offers customers
the option of one, two or three business day service backed by two money-back
guarantees. Shipments must be 151 lbs. - 2,200 lbs, and be forkliftable,
stackable, banded and shrinkwrapped. FedEx 1Day-SM- Freight offers noon
delivery, next-business-day in most areas of the continental United States,
including Alaska. FedEx 2Day Freight-Registered Trademark- offers 4:30 p.m.
delivery in 2 business days in all 50 states. No advance booking is required.
FedEx 3Day-SM- Freight offers 4:30 p.m. delivery within 3 business days in
every state except Alaska and Hawaii. No advance booking is required.
EXPANDED CHINESE ROUTE AUTHORITY
In June 1999, the U.S. Department of Transportation ("DOT") announced a
new protocol with the Chinese government permitting FedEx to expand its
existing service to China. FedEx is the only U.S. all-cargo airline with
route authority to serve China. DOT announced that FedEx would receive four
new weekly flights immediately and two additional flights beginning April
2000. The Company believes that these rights will be increasingly valuable as
the Asian economic recovery progresses.
5
ENHANCED WEB-BASED SOLUTIONS
Throughout 1999, FedEx continued to enhance its Internet-based solutions
for customers. In February 1999, the company upgraded its online tracking
application so that FedEx customers may query and receive package status
information for up to 25 shipments simultaneously and forward the detailed
tracking results to up to three e-mail addresses. Also, a simplified feature
now enables users to enter only the tracking number instead of the ship date
and destination data previously required. Users in Japan, France, Italy,
Germany, the Netherlands and Portuguese and Spanish-speaking countries in
Latin America can obtain package status information in their native
languages. FedEx maintains electronic connections with approximately two
million customers via FedEx Powership-Registered Trademark-, FedEx
Ship-Registered Trademark- and FedEx interNetShip-Registered Trademark-.
Approximately 70% of the company's shipments are initiated electronically.
FedEx's goal is to move this toward 100%.
FEDEX SERVICES
Detailed information about all of FedEx's services can be found on
FedEx's Internet web site at WWW.FEDEX.COM. FedEx offers three U.S. overnight
delivery services: FedEx First Overnight-Registered Trademark-, FedEx
Priority Overnight-Registered Trademark- and FedEx Standard
Overnight-Registered Trademark-. Overnight document and package service
extends to virtually the entire United States population. FedEx
SameDay-Registered Trademark- service is for urgent shipments up to 70 pounds
to virtually any U.S. destination. Packages and documents are either picked
up from shippers by FedEx couriers or are dropped off by shippers at FedEx
facilities, FedEx World Service Centers-Registered Trademark-,
FedEx-Registered Trademark- Drop Boxes, FedEx ShipSites-Registered Trademark-
or FedEx Authorized ShipCenters-Registered Trademark- strategically located
throughout the country. Two U.S. deferred services are available for less
urgent shipments: FedEx 2Day-Registered Trademark- and FedEx Express
Saver-Registered Trademark-. FedEx 1Day-SM- Freight, FedEx 2Day
Freight-Registered Trademark- and FedEx 3Day-SM- Freight are described above
in "FedEx U.S. Express Freight Services".
U.S. overnight and second-day services are primarily used by customers
for shipment of time-sensitive documents and goods, high-value machines and
machine parts, computer parts, software and consumer items from
manufacturers, distributors and retailers and to retailers, manufacturers and
consumers. FedEx employees handle virtually every shipment from origin to
destination.
In addition to the services discussed above, FedEx offers various
international package and document delivery services and international
freight services, including: FedEx-Registered Trademark- International Next
Flight, FedEx International First-Registered Trademark-, FedEx International
Priority-Registered Trademark- ("IP"), FedEx International Economy-Registered
Trademark-, FedEx International Priority DirectDistribution-Registered
Trademark-, FedEx International Priority Plus-Registered Trademark-, FedEx
International MailService-Registered Trademark-, FedEx International
Priority-Registered Trademark- Freight, FedEx International
Economy-Registered Trademark- Freight, FedEx International Express
Freight-Registered Trademark-, FedEx International Airport-to-Airport-SM-,
FedEx Expressclear-SM- Electronic Customs Clearance, and FedEx International
Broker Select-Registered Trademark-.
FedEx offers next business day 10:30 a.m. express cargo service
from Asia to the United States. The company has a direct flight from Osaka,
Japan to Memphis, Tennessee. The nonstop daily flight cuts transit times
across the Pacific in half for FedEx customers -- from 48 to 24 hours -- who
ship from Asia to North America. The FedEx IP service is backed by FedEx's
money-back guarantee. The flight schedule also enables the company to offer
its Asian customers later pickup times for connections through the company's
AsiaOne-Registered Trademark- hub in Subic Bay, The Philippines, to 13
major Asian markets.
6
CHARTER SERVICES AND CRAF PARTICIPATION
FedEx offers commercial and military charter services which supplement
the utilization of aircraft capacity when not needed in FedEx's scheduled
operations. In addition to providing these charter services, FedEx
participates in the Civil Reserve Air Fleet ("CRAF") program. Under this
program, the Department of Defense may requisition for military use certain
of FedEx's wide-bodied aircraft in the event of a declared need, including a
national emergency. FedEx is compensated for the operation of any aircraft
requisitioned under the CRAF program at standard contract rates established
each year in the normal course of awarding contracts. Through its
participation in the CRAF program, FedEx is entitled to bid on peacetime
military cargo charter business. FedEx, together with a consortium of other
carriers, currently contracts with the United States Government for charter
flights.
FedEx offers commercial and military charter services which supplement
the utilization of aircraft capacity when not needed in FedEx's scheduled
operations. During fiscal 1999, revenues from charter operations accounted
for approximately 0.7% of FedEx's total revenues and approximately 0.7% and
0.6% of total revenues during fiscal 1998 and 1997, respectively.
ELECTRONIC COMMERCE AND CUSTOMER SERVICES
Electronic Commerce and Customer Services ("ECCS"), formerly Logistics
and Electronic Commerce, combines the FedEx customer service, customer
automation and retail automation organizations with the FedEx customer
technology organization. ECCS focuses on markets in which delivering
high-speed, time-definite, information-intensive solutions provide
significant customer value. In 1999, ECCS further expanded its information
systems focus to solutions that enable customers to do business
electronically -- ranging from order-entry to after-sales support. The
combination of these electronic commerce capabilities and FedEx's global
transportation and information network allow FedEx's customers to create or
redesign their supply chains to reduce cost and improve service to their
customers.
ECCS offers FedEx customers several services as well as customer
automation. FedEx interNetShip-SM- provides shipment processing capability
within the United States on the World Wide Web. From FedEx's Web site
(WWW.FEDEX.COM), shippers can retrieve precise details on the status of their
shipments any time of day from anywhere in the world. FedEx also offers FedEx
Ship-Registered Trademark- software, free of charge, that can be used on a
personal computer. FedEx Ship allows customers to generate plain-paper
airbills on a laser printer, track shipment status, order FedEx pickups and
maintain a database of shipping addresses and activity using modems and their
own personal computers. FedEx PowerShip-Registered Trademark- 2, is a
stand-alone automated shipping system that provides package tracking,
produces shipping labels, calculates shipping charges, invoices the customer
daily and produces customized reports. For customers that ship 100 or more
packages a day, FedEx offers FedEx PowerShip Plus-Registered Trademark-
software, that performs the same functions as FedEx PowerShip 2 but can be
integrated with the customer's own computer systems for customer service,
accounting, inventory control and financial analysis purposes. FedEx
PowerShip PassPort-Registered Trademark- is an automated shipping system that
is automatically updated with FedEx's system information, such as routing
codes and rates. FedEx PowerShip 3-Registered Trademark- enables customers
who ship as few as three packages per day to enjoy the advantage of automated
shipping. FedEx offers supply chain management tools such as FedEx Express
Bridge-TM- for SAP R/3 and FedEx Net Return (which improves product returns
from customers by putting the process online). FedEx Direct Link-TM- allows
customers to receive and manage all of their FedEx invoicing data
electronically.
7
Additional options include FedEx Ship API-TM- and FedEx
Track API.-TM- FedEx Ship API streamlines a customer's online shipping
process by integrating FedEx's shipping templates and tools into the
customer's Web site or corporate information system. FedEx Ship API connects
the customer directly to FedEx when placing shipping orders and scheduling
pickup requests. FedEx Track API enables the customer's employees to track
FedEx packages without ever leaving the customer's Web site or corporate
information system.
PRICING
FedEx periodically publishes list prices in its Service Guides for the
majority of its services. In general, during fiscal 1999, U.S. shipping rates
were based on the service selected, destination zone, weight, size, any
ancillary service charge and whether or not the shipment was picked up by a
FedEx courier or dropped off by the customer at a FedEx location.
International rates are based on the type of service provided and vary with
size, weight and destination. FedEx offers its customers volume discounts
generally based on actual or potential average daily revenue produced.
Discounts are determined by reference to several local and national revenue
bands developed by FedEx.
Effective March 15, 1999, FedEx increased list rates an average of 2.8%
for shipments within the U.S. Rates for most shipments from the U.S. to most
of the 211 countries served by the company's global network remained the same.
SERVICE REVENUES
The following table shows the amount of revenues generated for each
class of service offered for the fiscal years ended May 31 (amounts in
thousands):
1999 1998 1997
---- ---- ----
Package:
U.S. overnight $ 7,185,462 $ 6,810,211 $ 6,243,790
U.S. deferred 2,271,151 2,179,188 1,621,647
International Priority 3,018,828 2,731,140 2,351,092
Freight:
U.S. 439,855 337,098 207,729
International 530,759 597,861 604,472
Other* 533,222 599,343 491,020
----------- ----------- -----------
Total $13,979,277 $13,254,841 $11,519,750
----------- ----------- -----------
----------- ----------- -----------
- ----------
* Includes revenues from sales of aircraft engine noise reduction kits,
revenues generated by the specialized services summarized above under
"Electronic Commerce and Customer Services," Canadian domestic revenue
and charter services.
8
SEASONALITY OF BUSINESS
FedEx's express package business and freight business are both
seasonal in nature. Historically, the U.S. package business experiences an
increase in late November and December. International business, particularly
in the Asia to U.S. market, peaks in October and November due to U.S.
holiday sales. The latter part of FedEx's third fiscal quarter and late
summer, being post winter-holiday and summer vacation seasons, have
historically exhibited lower volumes relative to other periods.
OPERATIONS
FedEx's global transportation and distribution services are provided
through an extensive worldwide network consisting of numerous aviation and
ground transportation operating rights and authorities, 637 aircraft,
approximately 46,000 vehicles, sorting facilities, FedEx World Service
Centers, FedEx Drop Boxes, FedEx ShipSites, FedEx Authorized ShipCenters and
sophisticated package tracking, billing and communications systems.
FedEx's primary sorting facility, the SuperHub located in Memphis,
serves as the center of FedEx's multiple hub-and-spoke system. A second
national hub is located in Indianapolis. In addition to these national hubs,
FedEx operates regional hubs in Newark, Oakland and Fort Worth and major
metropolitan sorting facilities in Los Angeles and Chicago. Facilities in
Anchorage, Alaska and Subic Bay, The Philippines, serve as sorting facilities
for express package and freight traffic moving to and from Asia, Europe and
North America. Major sorting and freight handling facilities are located at
Narita Airport in Tokyo, Charles de Gaulle Airport in Paris, Stansted Airport
outside London and Pearson Airport in Toronto. Facilities in Subic Bay and
Charles de Gaulle Airport are also designed to serve as regional hubs for
their respective market areas.
Throughout its worldwide network, FedEx operates city stations and
employs a staff of customer service agents, cargo handlers and couriers who
pick up and deliver shipments in the station's service area. In some cities,
FedEx operates FedEx World Service Centers which are staffed, store-front
facilities located in high-traffic, high-density areas. Unmanned FedEx Drop
Boxes provide customers the opportunity to drop off packages at locations in
office buildings, shopping centers and corporate or industrial parks. FedEx
has also formed alliances with certain retailers to extend this customer
convenience network to drop-off sites in retail stores. In international
regions where low package traffic makes FedEx's direct presence less
economical, Global Service Participants ("GSP") have been selected to
complete deliveries.
FedEx has an advanced package tracking and billing system, FedEx
COSMOS-Registered Trademark-, that utilizes hand-held electronic scanning
equipment and computer terminals. This system provides proof of delivery
information, an electronically reproduced airbill for the customer and
information regarding the location of a package within FedEx's system. For
international shipments, FedEx has developed FedEx Expressclear, a worldwide
electronic customs clearance system, which speeds up customs clearance by
allowing customs agents in destination countries to review information about
shipments before they arrive.
9
FUEL SUPPLIES AND COSTS
During fiscal 1999, FedEx purchased aviation fuel from various suppliers
under contracts which vary in length from 12 to 36 months and which provide
for specific amounts of fuel to be delivered. The fuel represented by these
contracts is purchased at market prices which may fluctuate daily. Management
believes that, barring a substantial disruption in supplies of crude oil,
these agreements will ensure the availability of an adequate supply of fuel
for FedEx's needs for the immediate future. However, a substantial reduction
of oil supplies from oil producing regions or refining capacity, or other
events causing a substantial reduction in the supply of aviation fuel, could
have a significant adverse effect on FedEx.
In past years, FedEx has entered into contracts which are designed to
limit its exposure to fluctuations in jet fuel prices. Under these contracts,
FedEx makes (or receives) payments based on the difference between a
specified lower (or upper) limit and the market price of jet fuel, as
determined by an index of spot market prices representing various geographic
regions. The difference is recorded as an increase or decrease in fuel
expense. FedEx hedges its exposure to jet fuel price market risk only on a
conservative, limited basis. At May 31, 1998, all such contracts had expired.
Under jet fuel contracts, FedEx made payments of $28,764,000 in 1998 and
received $15,162,000 (net of payments) in 1997. FedEx may enter into fuel
hedging contracts in 2000. The timing and magnitude of such contracts may
vary due to availability and pricing.
The following table sets forth FedEx's costs for aviation fuel and its
percentage of total operating expense for the previous five fiscal years:
TOTAL COST PERCENTAGE OF TOTAL
FISCAL YEAR (IN THOUSANDS) OPERATING EXPENSE
----------- -------------- -------------------
1999 $467,598 3.6%
1998 570,959 4.6
1997 557,533 5.2
1996 461,401 4.8
1995 394,225 4.5
Approximately 15% of FedEx's requirement for vehicle fuel is purchased
in bulk. The remainder of FedEx's requirement is satisfied by retail
purchases with various discounts. The percentage of total operating expense
for vehicle fuel purchases for each of the last five fiscal years has not
exceeded 1.5%.
COMPETITION
The express package and freight markets are both highly competitive and
sensitive to price and service. The ability to compete effectively depends
upon price, frequency and capacity of scheduled service, extent of geographic
coverage and reliability. Competitors in these markets include other express
package concerns, principally United Parcel Service of America, Inc. ("UPS"),
Airborne Express, DHL Worldwide Express, passenger airlines offering package
express services, regional express delivery concerns, airfreight forwarders
and the United States Postal Service. FedEx's principal competitors in the
international market are UPS, foreign national air carriers, foreign postal
authorities such as Deutsche Poste and TNT Post Group, United States
passenger airlines and all-cargo airlines.
10
FedEx currently holds certificates of authority to serve more foreign
countries than any other United States all-cargo air carrier and its
extensive, scheduled international route system allows it to offer
single-carrier service to many points not offered by its principal all-cargo
competitors. This international route system, combined with an integrated air
and ground network, enables FedEx to offer international customers more
extensive single-carrier service to a greater number of U.S. domestic points
than can be provided currently by competitors. However, many of FedEx's
competitors in the international market are government owned, controlled, or
subsidized carriers which may have greater resources, lower costs, less
profit sensitivity and more favorable operating conditions than FedEx.
REGULATION
AIR
Under the Federal Aviation Act of 1958, as amended, both DOT and the
Federal Aviation Administration ("FAA") exercise regulatory authority over
FedEx. The DOT's authority relates primarily to economic aspects of air
transportation. The DOT's jurisdiction extends to aviation route authority
and to other regulatory matters, including the transfer of route authority
between carriers. FedEx holds various certificates issued by the DOT,
authorizing FedEx to engage in U.S. and international air transportation of
property and mail on a worldwide basis. FedEx's international authority
permits it to carry cargo and mail from several points in its U.S. route
system to numerous points throughout the world. The DOT regulates
international routes and practices and is authorized to investigate and take
action against discriminatory treatment of United States air carriers abroad.
The right of a United States carrier to serve foreign points is subject to
the DOT's approval and generally requires a bilateral agreement between the
United States and the foreign government. The carrier must then be granted
the permission of such foreign government to provide specific flights and
services. The regulatory environment for global aviation rights may from time
to time impair the ability of FedEx to operate its air network in the most
efficient manner.
The FAA's regulatory authority relates primarily to safety and
operational aspects of air transportation, including aircraft standards and
maintenance, personnel and ground facilities, which may from time to time
affect the ability of FedEx to operate its aircraft in the most efficient
manner. FedEx holds an operating certificate granted by the FAA pursuant to
Part 121 of the Federal Aviation Regulations. This certificate is of
unlimited duration and remains in effect so long as FedEx maintains its
standards of safety and meets the operational requirements of the regulations.
GROUND
The ground transportation performed by FedEx is integral to its air
transportation services. Prior to January 1996, FedEx conducted its
interstate motor carrier operations pursuant to common and contract carrier
authorities issued by the Interstate Commerce Commission ("ICC"). The ICC
Termination Act of 1995 abolished the ICC and transferred responsibility for
interstate motor carrier registration to the DOT.
The enactment of the Federal Aviation Administration Authorization Act
of 1994 abrogated the authority of states to regulate the rates, routes or
services of intermodal all-cargo air carriers and most motor carriers. States
may now only exercise jurisdiction over safety and insurance. FedEx is
registered in those states that require registration.
11
COMMUNICATION
Because of the extensive use of radio and other communication facilities
in its aircraft and ground transportation operations, FedEx is subject to the
Federal Communications Commission Act of 1934, as amended. Additionally, the
Federal Communications Commission regulates and licenses FedEx's activities
pertaining to satellite communications.
ENVIRONMENTAL
Pursuant to the Federal Aviation Act, the FAA, with the assistance of
the Environmental Protection Agency, is authorized to establish standards
governing aircraft noise. FedEx's present aircraft fleet is in compliance
with current noise standards of the Federal Aviation Regulations. FedEx's
aircraft are also subject to, and are in compliance with, the regulations
governing engine emissions. In addition to federal regulation of aircraft
noise, certain airport operators have local noise regulations which limit
aircraft operations by type of aircraft and time of day. These regulations
have had a restrictive effect on FedEx's aircraft operations in some of the
localities where they apply but do not have a material effect on any of
FedEx's significant markets. Congress' passage of the Airport Noise and
Capacity Act of 1990 established a National Noise Policy which enabled FedEx
to plan for noise reduction and better respond to local noise constraints.
Certain regulations under the Clean Water Act, the Clean Air Act and the
Resource Conservation and Recovery Act impact FedEx's operations. In addition
to the matters discussed above, FedEx is most directly affected by
regulations pertaining to underground storage tanks, hazardous waste
handling, vehicle and equipment emissions and the discharge of effluents from
properties and equipment owned or operated by FedEx.
EMPLOYEES
FedEx is headquartered in Memphis, Tennessee. Theodore L. Weise is the
President and Chief Executive Officer of the company. At June 30, 1999, FedEx
employed approximately 88,000 permanent full-time and 50,000 permanent
part-time employees, of which approximately 21% are employed in Memphis.
Employees of FedEx's international branches and subsidiaries in the aggregate
represent approximately 12% of all employees. FedEx believes its relationship
with its employees is excellent.
On February 4, 1999, FedEx and the Fedex Pilots Association ("FPA")
announced that the union's membership had ratified a five-year collective
bargaining agreement to take effect on May 31, 1999, bringing the negotiating
process to a successful conclusion. The agreement provides, in part, for a
17% pay increase over the term of the contract (3.4% average annual
increase), enhanced retirement benefits, direct pilot input on scheduling
issues, and limits on types of trips scheduled during certain times of the
day.
Attempts by other labor organizations to organize certain other groups
of employees have been initiated. Although FedEx is responding to these
organization attempts, it cannot predict the outcome of these labor
activities or their effect, if any, on FedEx or its employees.
12
RPS, INC.
INTRODUCTION
By focusing on high-volume business-to-business customers, maintaining a
low cost structure and efficiently using information technology, RPS has
become the second-largest ground small-package carrier in the United States.
RPS serves customers in the small-package market in North America, focusing
primarily on the business-to-business delivery of packages weighing up to 150
pounds. RPS provides ground service to 100% of the United States population
and overnight service to 74% of the United States population. Through its
subsidiary, RPS, Ltd., service is provided to 100% of the Canadian
population. Additionally, RPS provides service to Mexico through an alliance
with Estefeda Mexicana, S.A. de C.V. RPS also offers service offshore to
Puerto Rico, Alaska and Hawaii via a ground/air network operation in
cooperation with other transportation providers.
RPS provides other specialized transportation services to meet specific
customer requirements in the small-package market. RPS conducts its
operations primarily with 8,700 owner-operated vehicles and, in addition,
owns over 10,000 trailers. Competition for high-volume, profitable business
focuses largely on providing competitive pricing and dependable service.
Beginning July 1998, RPS initiated a money-back guarantee on all
business-to-business ground deliveries within the continental United States.
RPS utilizes advanced automatic sortation technology to streamline the
handling of approximately 1.4 million daily packages. RPS also utilizes
software systems and Internet-based applications to offer its customers new
ways to connect internal package information with external delivery
information. In 1998, RPS added multiple-carrier shipment tracing and
proof-of-delivery signature functionality to its Web site (WWW.SHIPRPS.COM).
Like FedEx, RPS utilizes a hub-and-spoke sorting and distribution
system. Its 27 hubs are equipped with the most sophisticated
package-sortation technology in the industry, with average processing speeds
of 15,000 to 20,000 packages per hour.
Using overhead laser scanners, hub conveyors electronically guide
packages to their appropriate destination chute, where they are loaded for
transport to their destination terminals for local delivery. RPS is still the
only ground carrier to operate a fully automated sortation system for greater
efficiency and package integrity.
RPS is headquartered in Pittsburgh, Pennsylvania. Daniel J. Sullivan is
the President and Chief Executive Officer of the company. RPS has more than
31,000 employees and contractors in North America. RPS' primary competitors
are UPS (non-express services) and the United States Postal Service.
RECENT DEVELOPMENTS
In July 1999, RPS began piloting a new package delivery service targeted
to businesses that ship to residential addresses. Depending on the results of
the pilot, the company believes it can roll out a business-to-residential
service as early as spring 2000. RPS intends to leverage its existing
pickup operation and automated hub and linehaul network while initiating a
separate delivery network comprised of distinct terminals and a separate team
of independent contractors. The test involves the delivery of packages to
residences in the Pittsburgh, Pennsylvania metropolitan area. The company
will release further details of its new service once the results of the
prototype service are fully analyzed.
13
In January 1999, RPS announced its intention to boost its
package-processing capacity by 50% through a three-year expansion program.
Plans include the opening of three new state-of-the-art distribution hubs
that will support key metropolitan markets in New York, Chicago and Los
Angeles, as well as the relocation and expansion of more than 50 local
terminals over the next three years. RPS plans to invest $500 million in this
three year expansion. The Company recently opened a 195,000 square-foot
distribution hub in Rialto, CA, and a similar 153,000 square-foot
facility in Champaign, IL. These new facilities will, as do all RPS
hubs, use computerized package-sortation systems to ensure maximum
productivity and efficiency. RPS' third new hub will support the company's
plans to expand service within the New York metropolitan area. Scheduled to
open in the summer of 2000, the Woodbridge, NJ facility will be the largest
in the RPS network. It will be 329,000 square feet in size and capable of
processing 30,000 packages per hour - approximately double the processing
capacity of the average RPS hub. By the end of 1999, the company also will
expand existing hubs in Toledo, OH, Denver, CO and Sacramento, CA.
Also planned for completion by mid-2000 are the relocations and
expansions of more than 15 pick-up and delivery terminals, including
facilities in Albany, NY, Long Island, NY, Baltimore, MD, Beltsville, MD
(serving Washington, D.C.), Norfolk, VA, Pittsburgh, PA, Cincinnati, OH,
Detroit, MI, Carol Stream, IL (serving the Chicago metro area), Dallas, TX
and Burbank, CA.
VIKING FREIGHT, INC.
Viking specializes in one- and two-day less-than-truckload (LTL) service
throughout the western United States. Service is also available to Alaska and
Hawaii via alliances with ocean freight companies. Viking's management
focuses on achieving high levels of on-time delivery, easy-to-use information
technology and responsive customer service.
With next- and second-business day regional freight service, plus direct
ocean service to Alaska and Hawaii, Viking's 4,800 employees handle
approximately 13,000 shipments per day, achieving an award-winning on-time
delivery performance exceeding that of most other LTL carriers. Consistent
with its EZTDBW-Registered Trademark- ("Easy To Do Business With") service
philosophy, Viking has created two customer advisory boards -- one for
corporate accounts, the other for smaller shippers -- to better anticipate
and meet customers' needs. Viking has enhanced its customer service and today
responds to most inquiries within seconds. Viking's Web sites
(WWW.VIKINGFREIGHT.COM AND WWW.EZTDBW.COM) let customers conduct business
electronically with convenience and confidence.
In 1999, for the fourth time in the twelve year history of the award,
NASSTRAC named Viking its regional LTL carrier of the year. In addition,
readers of LOGISTICS MANAGEMENT AND DISTRIBUTION magazine voted to award
Viking the "QUEST FOR QUALITY AWARD FOR 1998," the eighth year Viking has
received this award.
Viking is headquartered in San Jose, California. Douglas G. Duncan is
the President and Chief Executive Officer of the company. Viking's primary
regional competitors are ConWay Western Express, Inc., USF Bestway, Inc. and
USF Reddaway Truck Line, Inc. Viking also competes with other regional and
long-haul carriers.
14
ROBERTS EXPRESS, INC.
Roberts Express is the world's largest surface-expedited carrier.
Roberts Express offers one service: time-specific, non-stop, door-to-door
delivery for critical shipments anytime, anywhere. Each shipper has exclusive
vehicle usage, eliminating freight handling since operations are free from
freight consolidation. A network of over 2,200 vehicles assures the customer
of time-specific service anywhere within the United States and Canada, with
pickup in less than ninety minutes within twenty-five miles of any of Roberts
Express's 223 ExpressCenters. CUSTOMER LINK, Roberts Express's integrated
two-way satellite communications system, enables the customer to immediately
trace his shipment to determine its status and to-the-minute delivery time.
Service is available 24 hours a day, 365 days a year, including weekends
and holidays, at no extra cost. If at any time during transport Roberts
Express is more than 15 minutes late, both the shipper and the consignee are
notified. If Roberts Express is more than two hours late on delivery, the
company will refund the customer 25% of the freight charges. If Roberts
Express is more than four hours late on delivery, the company will refund the
customer 50% of the freight charges. In many cases, Roberts Express offers
(with guaranteed delivery times) a faster and less expensive alternative to
heavyweight airfreight. More than 96% of shipments are delivered to the
customer within fifteen minutes of Roberts Express's time-specific promise.
Roberts' White Glove Services -Registered Trademark- division
specializes in the transport of high value products, medical and electronic
equipment, tradeshow exhibits, temperature-sensitive commodities and
high-security shipments. Roberts CharterAir -Registered Trademark- division
uses Roberts Express and White Glove vehicles and brokered aircraft on a
non-scheduled, exclusive use point-to-point basis to provide a door-to-door
guaranteed emergency "air-taxi" service. Express and Air Charter services are
available through Roberts Europe. Command operations are located in
Mastricht, The Netherlands. With continuous monitoring of shipments, two-way
satellite communications and multilingual agents and drivers, Roberts Europe
provides expedited services almost anywhere in Europe.
In March 1999, the company introduced Roberts Express Point-to-Point
service, a faster alternative to conventional airfreight service.
Point-to-Point utilizes Roberts Express vehicles and scheduled air freighters
to provide early next-day delivery of critical heavyweight airfreight
anywhere in the continental U.S. The new service is also available to and
from Canada and Europe. Point-to-point service is quicker than ground
expedited transportation for distances greater than 1,500 miles and is less
expensive than exclusive-use air charters.
Roberts Express is headquartered in Akron, Ohio. R. Bruce Simpson is the
President of the company. Roberts Express has approximately 600 employees and
1,700 owner-operators. Daily volume approximates 1,000 shipments. The
company's primary competitors are ConWay NOW, Inc., CTX, Emery Expedite,
Inc., Landstar Express America, Inc., TNT Expedite and Tri-State Expediting
Service, Inc.
FDX GLOBAL LOGISTICS, INC.
FDX Global Logistics was incorporated in Delaware on November 2, 1998
and serves as the holding company for Caliber Logistics, the operating company.
Caliber Logistics is a contract logistics provider to targeted industries
with expertise across the entire supply chain, from inbound materials
management through distribution to the final consumer. Services provided
include global transportation management, dedicated transportation, warehouse
operations and management, finished goods distribution, just-in-time
logistics programs, customer order processing, returnable container
management, freight bill payment and auditing and other management services
outsourced by its customers.
15
An important element in Caliber Logistics' overall value to customers is
improved information exchange. Caliber Logistics' transportation management
programs use advanced electronic data interchanges to speed communications
between customers and their suppliers. Faster communication translates into
more cost-effective logistics and competitive advantages. Caliber Logistics
manages over 100 logistics contracts, three million shipments per year and
over six million square feet of warehouse space.
FDX Global Logistics headquarters is located in Memphis, Tennessee.
Caliber Logistics headquarters is located in Hudson, Ohio. Caliber Logistics
European headquarters is located in Leiden, The Netherlands. Joseph C.
McCarty is the President and Chief Executive Officer of FDX Global Logistics.
Caliber Logistics, the operating company, has approximately 2,800 employees
and 600 owner-operators.
RECENT DEVELOPMENTS
On August 6, 1999, FDX Global Logistics announced the signing of an
agreement to acquire, for approximately $116 million in cash, substantially
all the assets of Geologistics Air Services, Inc. ("GLAS"). The acquisition
is subject to the approval of the U.S. Government and to the satisfaction of
certain conditions by GLAS and the company. The acquisition is expected to
close in the fall of 1999. FDX Global Logistics intends to operate GLAS
through a newly-formed, wholly-owned subsidiary, Caribbean Transportation
Services, Inc., a Delaware corporation ("CTS"). GLAS, a provider of
airfreight forwarder services between the United States, Puerto Rico and the
Dominican Republic, specializes in arranging the shipment of heavyweight and
oversized cargo. GLAS provides airfreight forwarder services to the medical,
pharmaceutical and technology sectors. GLAS is headquartered in Greensboro,
North Carolina. Richard A. Faieta, President and Chief Executive Officer of
GLAS, will serve as President and Chief Executive Officer of CTS.
RPS, VIKING, ROBERTS EXPRESS - REGULATION
Prior to January 1996, RPS, Viking and Roberts Express conducted their
operations pursuant to common and contract carrier authorities issued by the
ICC. The ICC Termination Act of 1995 abolished the ICC and transferred
responsibility for interstate motor carrier registration to the DOT.
The operations of RPS, Viking and Roberts Express in interstate commerce
are currently regulated by the DOT and the Federal Highway Administration,
which retain limited oversight authority over motor carriers. Federal
legislation has been enacted that preempted regulation by the states of rates
and service in intrastate freight transportation.
Like other interstate motor carriers, RPS, Viking and Roberts Express
are subject to certain DOT safety requirements governing interstate
operations. In addition, vehicle weight and dimensions remain subject to both
federal and state regulations.
RPS, Viking and Roberts Express are subject to federal, state and local
environmental laws and regulations relating to, among other things,
contingency planning for spills of petroleum products and the disposal of
waste oil. Additionally, RPS, Viking and Roberts Express are subject to
numerous regulations dealing with underground fuel storage tanks and each
company has environmental management programs to conform with these
regulations.
16
RPS, VIKING, ROBERTS EXPRESS - SEASONALITY
The transportation and logistics industry is affected directly by the
state of the overall economy. Seasonal fluctuations affect tonnage, revenues
and earnings. Normally, the fall of each year is the busiest shipping period
for each of the three companies; the latter part of December, January, June
and July of each year are the slowest periods. Shipment levels, operating
costs and earnings can also be adversely affected by inclement weather.
ITEM 2. PROPERTIES
FDX CORPORATION
The Company does not own any real property. The Company leases two
facilities in the Memphis area for its corporate headquarters and
administrative offices.
FEDERAL EXPRESS CORPORATION
FedEx's principal owned or leased properties include its aircraft,
vehicles, national, regional and metropolitan sorting facilities,
administration buildings, FedEx World Service Centers, FedEx Drop Boxes and
data processing and telecommunications equipment.
AIRCRAFT AND VEHICLES
FedEx's aircraft fleet at June 30, 1999 consisted of the following:
MAXIMUM GROSS
STRUCTURAL PAYLOAD
DESCRIPTION NUMBER (POUNDS PER AIRCRAFT)*
- ----------- ------ ----------------------
McDonnell Douglas MD11 29** 198,500
McDonnell Douglas DC10-30 22** 172,000
McDonnell Douglas DC10-10 59** 142,000
Airbus A300-600 32** 117,700
Airbus A310-200 39** 74,200
Boeing B727-200 95** 59,500
Boeing B727-100 68** 38,000
Fokker F27-500 24 14,000
Fokker F27-600 8 12,500
Cessna 208B 251 3,500
Cessna 208 10 3,000
---
Total 637
- ----------
* Maximum gross structural payload includes revenue payload and container
weight.
** 29 MD11, 17 DC10-30, four DC10-10, 32 A300, 16 A310, 13 B727-200 and five
B727-100 aircraft are subject to operating leases.
17
The A300s and A310s are two-engine, wide-bodied aircraft which have a
longer range and more capacity than B727s. The MD11s are three-engine,
wide-bodied aircraft which have a longer range and larger capacity than
DC10s. The DC10s are three-engine, wide-bodied aircraft which have been
specially modified to meet FedEx's cargo requirements. The B727s are
three-engine aircraft configured for cargo service. FedEx's Fokker F27 and
Cessna 208 turbo-prop aircraft are owned by FedEx and leased to unaffiliated
operators to support FedEx operations in areas where demand does not justify
use of a larger aircraft. An inventory of spare engines and parts is
maintained for each aircraft type.
In addition, FedEx "wet leases" approximately 21 smaller piston-engine
and turbo-prop aircraft which feed packages to and from airports served by
FedEx's larger jet aircraft. The wet lease agreements call for the
owner-lessor to provide flight crews, insurance and maintenance, as well as
fuel and other supplies required to operate the aircraft. FedEx's wet lease
agreements are for terms not exceeding one year and are generally cancellable
upon 30 days' notice.
At June 30, 1999, FedEx operated worldwide approximately 46,000 ground
transport vehicles, including pick-up and delivery vans, larger trucks called
container transport vehicles and over-the-road tractors and trailers.
AIRCRAFT PURCHASE COMMITMENTS
At May 31, 1999, FedEx was committed under various contracts to purchase
five Airbus A300s, 31 MD11s, six DC10s (in addition to those discussed in the
following paragraph) and 75 Ayres ALM 200 aircraft to be delivered through
2007.
FedEx has entered into agreements with two airlines to acquire 53 DC10
aircraft (39 of which have been received as of May 31, 1999), spare parts,
aircraft engines and other equipment, and maintenance services in exchange
for a combination of aircraft engine noise reduction kits and cash. Delivery
of these aircraft began in 1997 and will continue through 2001. Additionally,
these airlines may exercise put options through December 31, 2003, requiring
FedEx to purchase up to 20 additional DC10s along with additional aircraft
engines and equipment. In January 1999, put options were exercised by an
airline requiring FedEx to purchase nine DC10s (in addition to the 53
discussed immediately above) for a total purchase price of $29,700,000.
Delivery of the aircraft began in March 1999 and is expected to be completed
by January 2000.
18
SORTING AND HANDLING FACILITIES
At July 1, 1999, FedEx operated the following sorting and handling
facilities:
SORTING LEASE
SQUARE CAPACITY EXPIRATION
LOCATION ACRES FEET (PER HOUR)* LESSOR YEAR
-------- ----- ------ ----------- ------ ----------
NATIONAL
Memphis, Tennessee 479 3,074,440 465,000 Memphis-Shelby County 2012
Airport
Authority
Indianapolis, Indiana 120 645,000 175,000 Indianapolis Airport 2016
Authority
REGIONAL
Fort Worth, Texas 168 641,000 74,000 Fort Worth Alliance 2014
Airport Authority
Newark, New Jersey 56 503,800 142,000 Port Authority of New 2010
York and New Jersey
Oakland, California 66 320,000 47,500 City of Oakland 2011
METROPOLITAN
Los Angeles, California 25 305,000 53,000 City of Los Angeles 2009
Chicago, Illinois 55 419,000 47,000 City of Chicago 2018
Anchorage, Alaska+ 42 258,000 14,200 Alaska Department of 2013
Transportation and Public
Facilities
INTERNATIONAL
Subic Bay, 18 300,000 16,000 Subic Bay Metropolitan 2002
The Philippines++ Authority
- ----------
* Documents and packages
+ Handles international express package and freight shipments to and from
Asia, Europe and North America.
++ Handles intra-Asia express package and freight shipments.
FedEx's facilities at the Memphis International Airport also consist of
aircraft hangars, flight training and fuel facilities, administrative offices
and warehouse space. FedEx leases these facilities from the Memphis-Shelby
County Airport Authority under several leases. The leases cover land, the
administrative and sorting buildings, other facilities, ramps and certain
related equipment. FedEx has the option to purchase certain equipment (but
not buildings or improvements to real estate) leased under such leases at the
end of the lease term for a nominal sum. The leases obligate FedEx to
maintain and insure the leased property and to pay all related taxes,
assessments and other charges. The leases are subordinate to, and FedEx's
rights thereunder could be affected by, any future lease or agreement between
the Authority and the United States Government.
19
In addition to the facilities noted above, FedEx has major international
sorting and freight handling facilities located at Narita Airport in Tokyo,
Japan, Charles de Gaulle Airport in Paris, France, Stansted Airport outside
London, England and Pearson Airport in Toronto, Canada. New, larger
facilities were opened in 1998 at the new Chek Lap Kok airport in Hong Kong,
CKS International Airport in Taiwan and Dubai, United Arab Emirates.
Construction on a 189,000 square foot facility to be located at Miami
International Airport is expected to begin in late 1999 or early 2000.
CHARLES DE GAULLE EUROPEAN REGIONAL HUB
FedEx currently leases approximately 108,000 square feet from Aeroports
de Paris ("ADP") for FedEx's European sort facility. FedEx expects its new
European regional hub facility located at Charles de Gaulle Airport, Roissy
(Paris), France to be operational in early September 1999. The facility will
be 861,325 square feet located in 14 different buildings. FedEx will lease
the space from ADP. The lease term commences on the first day of operations
of the new facility and terminates 30 years later. The sort capacity in phase
one of the facility is expected to be 48,000 packages and documents per hour.
As of July 30, 1999, FedEx is in the operational testing and training
phase of the new facility. The first day of operations is scheduled to be
September 6, 1999. The aircraft ramp is in place and FedEx expects that the
facility will be ready to accept aircraft on September 6.
FedEx is required to give ADP two months' prior notice when the company
will move out of the existing leased facility and terminate the lease. The
company has not yet given ADP such notice because FedEx may need to keep some
of the existing leased space. As of July 30, 1999, FedEx plans to retain
approximately half of the present area or about 54,000 square feet for
heavyweight airfreight operations, ECCS operations (principally warehousing
operations) and for FedEx's GSPs.
ADMINISTRATIVE AND OTHER PROPERTIES AND FACILITIES
FedEx has facilities housing administrative and technical operations on
approximately 200 acres adjacent to the Memphis International Airport. Of the
seven buildings located on this site, four are subject to long-term leases,
and the other three are owned by FedEx. FedEx also leases approximately 90
facilities in the Memphis area for its corporate headquarters, warehouse
facilities and administrative offices. FedEx has opened an office campus in
Collierville, Tennessee for its information technology and telecommunications
division, and is building a headquarters office campus in East Shelby County,
Tennessee. The headquarters campus, which will comprise nine separate
buildings with more than 1.1 million square feet of space, is designed to
consolidate many administrative and training functions currently spread
throughout the Memphis metropolitan area. When completed by late fall of
2001, the office campus will bring together approximately 3,700 employees
from more than 100 work groups.
FedEx owns 14 and leases 711 facilities for city station operations in
the United States. In addition, 151 city stations are owned or leased
throughout FedEx's international network. The majority of these leases are
for terms of five to ten years. FedEx believes that suitable alternative
facilities are available in each locale on satisfactory terms, if necessary.
As of July 1, 1999, FedEx leased space for 372 FedEx World Service Centers in
the United States and had placed approximately 34,066 Drop Boxes. FedEx also
owns stand-alone mini-centers located on leaseholds in parking lots adjacent
to office buildings, shopping centers and office parks of which 114 were
operating at July 1, 1999. Internationally, FedEx leases space for 43 FedEx
World Service Centers and has approximately 973 FedEx Drop Boxes.
20
FedEx leases central processing units and most of the disk drives,
printers and terminals used for data processing. Owned equipment consists
primarily of Digitally Assisted Dispatch Systems ("DADS") terminals used in
communications between dispatchers and couriers, computerized routing,
tracing and billing equipment used by customers and mobile radios used in
FedEx's vehicles. FedEx also leases space on C-Band and Ku-Band satellite
transponders for use in its telecommunications network.
RPS, INC.
As of June 30, 1999, RPS operated 369 facilities, including 27 hubs.
Fifty-four of the facilities, 23 of which are hubs, are owned; 315 facilities
are leased, generally for terms of three years or less. Thirteen of the
facilities, three of which are hubs, are operated by RPS, Ltd., RPS'
subsidiary operating in Canada. The 27 hub facilities are strategically
located to cover the geographic area served by RPS. These facilities average
111,000 square feet and range in size from 33,000 to 315,000 square feet.
RPS' corporate offices and information and data centers are located in
the Pittsburgh, Pennsylvania area in an approximately 350,000 square foot
building owned by RPS.
VIKING FREIGHT, INC.
As of June 30, 1999, Viking operated 50 terminals, 35 of which are
owned. The terminals are strategically located to cover the geographic area
served by Viking. These facilities range in size from 1,800 to 72,650 square
feet of office and dock space, and are located on sites ranging from 1.8 to
22.0 acres. The company's corporate headquarters is located in leased
facilities in San Jose, California.
ROBERTS EXPRESS, INC.
Roberts Express's corporate headquarters is located in Akron, Ohio in
owned facilities. Roberts does not use terminal facilities in its business.
FDX GLOBAL LOGISTICS, INC.
FDX Global Logistics' corporate headquarters is located in Memphis,
Tennessee in leased facilities. Caliber Logistics' headquarters is located in
Hudson, Ohio in leased facilities.
ITEM 3. LEGAL PROCEEDINGS
FEDERAL EXPRESS CORPORATION
There are two separate class-action lawsuits against FedEx generally
alleging that FedEx has breached its contract with the plaintiffs in
transporting packages shipped by them. These lawsuits allege that FedEx
continued to collect a 6.25% federal excise tax on the transportation of
property shipped by air after the tax expired on December 31, 1995, until it
was reinstated in August 1996. The plaintiffs seek certification as a
class action, damages, an injunction to enjoin FedEx from continuing to
collect the excise tax referred to above, and an award of attorneys' fees and
costs. One case was filed in Circuit Court of Greene County, Alabama.
21
The other case, which was filed in the Supreme Court of New York, New
York County, and contained allegations and requests for relief substantially
similar to the Alabama case, was dismissed with prejudice on FedEx's motion
on October 7, 1997. The Court found that there was no breach of contract and
that the other causes of action were preempted by federal law. The plaintiffs
appealed the dismissal. This case originally alleged that FedEx continued to
collect the excise tax on the transportation of property shipped by air after
the tax expired on December 31, 1996. The New York complaint was later
amended to cover the first expiration period of the tax (December 31, 1995
through August 27, 1996) covered in the original Alabama complaint. The
dismissal was affirmed by the appellate court on March 2, 1999. The
plaintiffs are now seeking permission to appeal to the next appellate level.
The air transportation excise tax expired on December 31, 1995, was
reenacted by Congress effective August 27, 1996, and expired again on
December 31, 1996. The excise tax was then reenacted by Congress effective
March 7, 1997. The expiration of the tax relieved FedEx of its obligation to
pay the tax during the periods of expiration. The Taxpayer Relief Act of
1997, signed by President Clinton in August 1997, extended the tax for ten
years through September 30, 2007.
FedEx intends to vigorously defend itself in this case. No amount has
been reserved for this contingency.
In November 1987, The Flying Tiger Line Inc. ("Flying Tigers"), a
company acquired by FedEx in 1989, received a notice from the United States
Environmental Protection Agency ("EPA") identifying Flying Tigers as a
potentially responsible party ("PRP") in connection with a "Superfund" site
located in Monterey Park, California. The site is a 190-acre landfill which
operated from 1948 through 1984. In June 1985, the EPA began a remedial
investigation of the site to identify the extent of contamination. The EPA
estimates that approximately 0.1% of the waste disposed at the site is
attributable to Flying Tigers. Flying Tigers participated in a partial
settlement relating to remedial actions for management of contamination and
site control. Partial consent decrees were entered in the United States
District Court for the Central District of California in 1989 and 1992 which
provided, in part, for payments of $109,000 and $230,000, respectively, by
Flying Tigers and FedEx to the partial-settlement escrow account. All
outstanding issues are not expected to be resolved for several years. Due to
several variables which are beyond FedEx's control, it is impossible to
accurately estimate FedEx's potential share of the remaining costs, but based
on Flying Tigers' relatively insignificant contribution of waste to the site,
FedEx believes that its remaining liability will not be material.
THE COMPANY
The Company and its subsidiaries are subject to other legal proceedings
and claims 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 materially adversely affect the Company's financial
position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year ended May 31, 1999.
22
EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding executive officers of the Company is as follows
(included herein pursuant to Instruction 3 to Item 401(b) of Regulation S-K
and General Instruction G(3) of Form 10-K):
OFFICER, YEAR FIRST
ELECTED AS OFFICER AGE POSITIONS HELD WITH COMPANY
------------------- --- ---------------------------
FREDERICK W. SMITH 54 Chairman, President and Chief
1971 Executive Officer of the Company
since January 1998; Chairman of
FedEx since 1975; Chairman,
President and Chief Executive
Officer of FedEx from April 1993
to January 1998; Chief Executive
Officer of FedEx from 1977 to
January 1998; and President of
FedEx from June 1971 to February
1975.
T. MICHAEL GLENN 43 Executive Vice President - Market
1985 Development and Corporate
Communications of the Company
since January 1998; Senior Vice
President - Marketing, Customer
Service and Corporate
Communications of FedEx from June
1994 to January 1998; Senior Vice
President - Marketing and Corporate
Communications of FedEx from
December 1993 to June 1994; Senior
Vice President - Worldwide Marketing
Catalog Services and Corporate
Communications of FedEx from June
1993 to December 1993; Senior Vice
President - Catalog and Remail
Services of FedEx from September
1992 to June 1993; Vice President -
Marketing of FedEx from August 1985
to September 1992; and various
management positions in sales and
marketing and senior sales
specialist of FedEx from 1981 to
1985.
ALAN B. GRAF, JR. 45 Executive Vice President and Chief
1987 Financial Officer of the Company
since January 1998; Executive Vice
President and Chief Financial
Officer of FedEx from February
1996 to January 1998; Senior Vice
President and Chief Financial
Officer of FedEx from December
1991 to February 1996; Vice
President and Treasurer of FedEx
from August 1987 to December 1991;
and various management positions
in finance and a senior financial
analyst of FedEx from 1980 to 1987.
23
OFFICER, YEAR FIRST
ELECTED AS OFFICER AGE POSITIONS HELD WITH COMPANY
------------------- --- ---------------------------
JAMES S. HUDSON 50 Corporate Vice President - Strategic
1992 Financial Planning and Control and
Principal Accounting Officer since
January 1998; Vice President - Corporate
Financial Planning and Control of
FedEx from January 1997 to January
1998; Vice President, Controller
and Chief Accounting Officer of
FedEx from December 1994 to January
1997; Vice President-Finance -
Europe, Africa and Mediterranean of
FedEx from July 1992 to December
1994; and various management
positions in finance at FedEx from
1974 to 1992.
DENNIS H. JONES 47 Executive Vice President and Chief
1986 Information Officer of the Company since
January 1998; Senior Vice President
and Chief Information Officer of FedEx
from December 1991 to January 1998;
Vice President - Customer
Automation and Invoicing of FedEx
from December 1986 to December
1991; and various management
positions in finance and a
financial analyst of FedEx from
1975 to 1986.
KENNETH R. MASTERSON 55 Executive Vice President, General
1980 Counsel and Secretary of the Company
since January 1998; Executive Vice
President, General Counsel and
Secretary of FedEx from February
1996 to January 1998; Senior Vice
President, General Counsel and
Secretary of FedEx from September
1993 to February 1996; Senior Vice
President and General Counsel of
FedEx from February 1981 to
September 1993; and Vice President
- Legal of FedEx from January 1980
to February 1981.
Officers are elected by, and serve at the discretion of, the Board of
Directors. There is no arrangement or understanding between any officer and
any person, other than a director or executive officer of the Company or of
any of its subsidiaries acting in his or her official capacity, pursuant to
which any officer was selected. There are no family relationships between any
executive officer and any other executive officer or director of the Company
or of any of its subsidiaries. There has been no event involving any
executive officer under any bankruptcy act, criminal proceeding, judgment or
injunction during the past five years.
24
PART II
Information for Items 5 through 8 of this Report appears in the
Company's 1999 Annual Report to Stockholders as indicated in the following
table and is incorporated herein by reference.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Information regarding stock listing, market information and stockholders
is contained in the Corporate Information section of the Company's 1999
Annual Report to Stockholders, on page 40 under the headings, "Stock
listing," "Stockholders" and "Market information" and is incorporated herein
by reference. As of August 2, 1999, the closing price of the Company's common
stock on the New York Stock Exchange was $44.75 per share.
No cash dividends have been declared. The Company has never declared a
dividend on its shares because its policy has been to reinvest earnings in
the Company's businesses.
There are no material restrictions on the Company's ability to declare
dividends, nor are there any material restrictions on the ability of the
Company's subsidiaries to transfer funds to the Company in the form of cash
dividends, loans or advances. See Note 4 to Notes to Consolidated Financial
Statements set forth in the Company's 1999 Annual Report to Stockholders,
which Note is incorporated herein by reference.
PAGE IN ANNUAL REPORT
TO STOCKHOLDERS
---------------------
ITEM 6. SELECTED FINANCIAL DATA
Selected Consolidated Financial Data................. 39
See Management's Discussion and Analysis of Results
of Operations and Financial Condition set forth in the
Company's 1999 Annual Report to Stockholders for a
discussion of factors such as accounting changes, business
combinations or dispositions of business operations that
may materially affect the comparability of the information
reflected in selected financial data.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION.... 9
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK................................ 14, 15
25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Statements of Income......................... 19
Consolidated Balance Sheets............................... 20
Consolidated Statements of Cash Flows..................... 21
Consolidated Statements of Changes in
Stockholders' Investment and Comprehensive Income....... 22
Notes to Consolidated Financial Statements................ 23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding members of the Company's Board of Directors is
presented in sections "Stock Ownership - Directors and Executive Officers,"
"Election of Directors," "Meetings and Committees," "Compensation of
Directors," and "Transactions with Management and Others and Compensation
Committee Interlocks and Insider Participation" on pages 6, 8 through 12 and
on page 21 of the Definitive Proxy Statement for the Company's 1999 Annual
Meeting of Stockholders which will be held September 27, 1999 and is
incorporated herein by reference. Information regarding executive officers of
the Company is included above in Part I of this Form 10-K under the caption
"Executive Officers of the Registrant" pursuant to Instruction 3 to Item
401(b) of Regulation S-K and General Instruction G(3) of Form 10-K.
Information for Items 11 through 13 of this Report appears in the
Definitive Proxy Statement for the Company's 1999 Annual Meeting of
Stockholders to be held on September 27, 1999, as indicated in the following
table and is incorporated herein by reference.
PAGE IN PROXY
STATEMENT
-------------
ITEM 11. EXECUTIVE COMPENSATION
Compensation Information................................... 13
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Stock Ownership - Directors and Executive Officers......... 2
Stock Ownership - Significant Stockholders................. 2
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others and Compensation
Committee Interlocks and Insider Participation......... 21
26
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The consolidated financial statements of the Company, together with
the Notes to Consolidated Financial Statements, and the report thereon of
Arthur Andersen LLP, dated June 29, 1999, are presented on pages 19 through
38 of the Company's 1999 Annual Report to Stockholders and are incorporated
herein by reference. The Report of Independent Auditors on the consolidated
statements of income, shareholders' equity and cash flows of Caliber System,
Inc. (not presented separately herein) for the year ended December 31, 1996
is included as Exhibit 99 to this Report. With the exception of the
aforementioned information and the information incorporated by reference in
Items 1, 5, 6, 7, 7A and 8 hereof, the Company's 1999 Annual Report to
Stockholders is not to be deemed as filed as part of this Report.
2. FINANCIAL STATEMENT SCHEDULE PAGE NUMBER
IN FORM 10-K
------------
Report of Independent Public Accountants on Financial Statement
Schedule..................................................... S-1
Schedule II - Valuation and Qualifying Accounts................ S-2
All other financial statement schedules have been omitted because they
are not applicable or the required information is included in the
consolidated financial statements, or the notes thereto, contained in the
Company's 1999 Annual Report to Stockholders and incorporated herein by
reference.
3. EXHIBITS
Exhibits 3.1, 3.2, 4.1 through 4.28, 10.1 through 10.105, 12,
13, 21, 23.1, 23.2, 24, 27 and 99 are being filed in connection with this
Report and incorporated herein by reference.
The Exhibit Index on pages E-1 through E-15 is incorporated herein by
reference.
(b) REPORTS ON FORM 8-K
No reports were filed on Form 8-K for the fourth quarter of the Company's
fiscal year.
27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Report
to be signed on its behalf by the undersigned, thereunto duly authorized.
FDX CORPORATION
(Registrant)
BY: /s/ JAMES S. HUDSON
-----------------------------------
James S. Hudson
Corporate Vice President -
Strategic Financial Planning
and Control
(PRINCIPAL ACCOUNTING OFFICER)
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf
of the Registrant in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/ FREDERICK W. SMITH* Chairman, President and
- --------------------------- Chief Executive Officer
Frederick W. Smith and Director
(PRINCIPAL EXECUTIVE OFFICER)
/s/ ALAN B. GRAF, JR.* Executive Vice President and
- --------------------------- Chief Financial Officer
Alan B. Graf, Jr. (PRINCIPAL FINANCIAL OFFICER)
/s/ JAMES S. HUDSON Corporate Vice President - August 16, 1999
- --------------------------- Strategic Financial Planning
James S. Hudson and Control
(PRINCIPAL ACCOUNTING OFFICER)
/s/ ROBERT H. ALLEN * Director
- ---------------------------
Robert H. Allen
/s/ ROBERT L. COX * Director
- ---------------------------
Robert L. Cox
/s/ RALPH D. DENUNZIO * Director
- ---------------------------
Ralph D. DeNunzio
28
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/ JUDITH L. ESTRIN * Director
- ---------------------------
Judith L. Estrin
/s/ PHILIP GREER * Director
- ---------------------------
Philip Greer
/s/ J. R. HYDE, III * Director
- ---------------------------
J. R. Hyde, III
/s/ CHARLES T. MANATT * Director
- ---------------------------
Charles T. Manatt
/s/ GEORGE J. MITCHELL * Director
- ---------------------------
George J. Mitchell
/s/ JACKSON W. SMART, JR.* Director
- ---------------------------
Jackson W. Smart, Jr.
/s/ JOSHUA I. SMITH * Director
- ---------------------------
Joshua I. Smith
/s/ PAUL S. WALSH* Director
- ---------------------------
Paul S. Walsh
/s/ PETER S. WILLMOTT * Director
- ---------------------------
Peter S. Willmott
*By: /s/ JAMES S. HUDSON August 16, 1999
-------------------
James S. Hudson
Attorney-in-Fact
29
S-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To FDX Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in FDX Corporation's 1999 Annual
Report to Stockholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated June 29, 1999. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole. The
financial statement schedule on page S-2 is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. The financial statement schedule has been subjected to
the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
/S / ARTHUR ANDERSEN LLP
----------------------------------
ARTHUR ANDERSEN LLP
Memphis, Tennessee,
June 29, 1999
S-2
SCHEDULE II
FDX CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED MAY 31,1999,
1998 AND 1997
(In thousands)
ADDITIONS
------------------------
BALANCE
BALANCE AT CHARGED TO CHARGED TO AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS YEAR
- ----------- ---------- ---------- ----------- ----------- -------
Accounts
Receivable Allowances
- ---------------------
1999............... $61,409 $71,704 $2,769 (A) $ 67,577 (B) $68,305
------- ------- ------ -------- -------
------- ------- ------ -------- -------
1998 (1)........... $86,154 $95,634 $ -- $120,379 (B) $61,409
------- ------- ------ -------- -------
------- ------- ------ -------- -------
1997 (2)........... $43,395 $76,150 $ -- $ 51,415 (B) $68,130
------- ------- ------ -------- -------
------- ------- ------ -------- -------
Viking
Restructuring Reserve
- ---------------------
1999............... $18,857 $ -- $ -- $ 2,818 (C) $16,039
------- ------- ------ -------- -------
------- ------- ------ -------- -------
1998 (1)........... $64,342 $ -- $ -- $ 45,485 (C) $18,857
------- ------- ------ -------- -------
------- ------- ------ -------- -------
Reserve Related to
Merger of
FedEx and Caliber
- ------------------
1999............... $27,274 $ -- $ -- $ 11,628 (C) $15,646
------- ------- ------ -------- -------
------- ------- ------ -------- -------
1998 (1)........... $ -- $88,000 $ -- $ 60,726 (C) $27,274
------- ------- ------ -------- -------
------- ------- ------ -------- -------
(A) Reclassifications.
(B) Uncollectible accounts written off, net of recoveries.
(C) Amounts paid and charged to reserve.
(1) Period comprises Caliber's 53-week period from May 25, 1997 to May 31,
1998 consolidated with FedEx's year ended May 31, 1998.
(2) Period comprises Caliber's calendar year ended December 31, 1996
consolidated with FedEx's year ended May 31, 1997.
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
3.1 Amended and Restated Certificate of Incorporation of Registrant
(Filed as Exhibit 3.1 to Amendment No. 1 to Registrant's
Registration Statement on Form S-4, Commission File No.
333-39483, and incorporated herein by reference.)
3.2 Amended and Restated By-laws of Registrant (Filed as Exhibit
3.2 to Amendment No. 1 to Registrant's Registration Statement on
Form S-4, Commission File No. 333-39483, and incorporated
herein by reference.)
4.1 Indenture dated as of May 15, 1989 between FedEx and BONY
relating to FedEx's unsecured debt securities. (Filed as an
exhibit to FedEx's Registration Statement No. 33-28796 on Form
S-3 and incorporated herein by reference.)
4.2 Supplemental Indenture No. 2 dated as of August 11, 1989
between FedEx and BONY. (Filed as Exhibit 4.2 to FedEx's
Registration Statement No. 33-30415 on Form S-3 and
incorporated herein by reference.)
E-1
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
4.3 Supplemental Indenture No. 3 dated as of October 15, 1989
between FedEx and BONY relating to FedEx's 9 5/8% Sinking Fund
Debentures due October 15, 2019. (Filed as Exhibit 4.2 to
FedEx's Current Report on Form 8-K dated October 16, 1989,
Commission File No. 1-7806, and incorporated herein by
reference.)
4.4 Supplemental Indenture No. 5 dated as of August 15, 1990
between FedEx and BONY. (Filed as Exhibit 4(c) to FedEx's
Current Report on Form 8-K dated August 28, 1990, Commission
File No. 1-7806, and incorporated herein by reference.)
4.5 Indenture dated May 15, 1989 including Supplemental Indenture
Nos. 2, 3 and 5 dated as described above, between FedEx and
BONY, relating to FedEx's Medium-Term Notes, Series B, the last
of which is due August 15, 2006, FedEx's 9 7/8% Notes due April
1, 2002, FedEx's 9.65% Notes due June 15, 2012. (Filed as
described above.)
4.6 Form of Fixed Rate Medium-Term Note, Series B, the last of
which is due August 15, 2006. (Filed as Exhibit 4.4 to FedEx's
Registration Statement No. 33-40018 on Form S-3 and
incorporated herein by reference.)
4.7 Form of Floating Rate Medium-Term Note, Series B, the last of
which is due August 15, 2006. (Filed as Exhibit 4.5 to FedEx's
Registration Statement No. 33-40018 on Form S-3 and
incorporated herein by reference.)
4.8 Form of 9 7/8% Note due April 1, 2002. (Filed as Exhibit 4.1 to
FedEx's Current Report on Form 8-K dated March 23, 1992,
Commission File No. 1-7806, and incorporated herein by
reference.)
4.9 Form of 9.65% Note due June 15, 2012. (Filed as Exhibit 4.1 to
FedEx's Current Report on Form 8-K dated June 18, 1992,
Commission File No. 1-7806, and incorporated herein by
reference.)
4.10 Indenture dated as of July 1, 1996 between FedEx and The First
National Bank of Chicago, as Trustee, relating to FedEx's
unsecured debt securities. (Filed as Exhibit 4.14 to FedEx's
FY96 Annual Report on Form 10-K, Commission File No. 1-7806,
and incorporated herein by reference.)
4.11 Supplemental Indenture No. 1 dated as of July 1, 1997 between
FedEx and The First National Bank of Chicago relating to
FedEx's 7.60% Notes due July 1, 2097. (Filed as Exhibit 4.1 to
FedEx's Current Report on Form 8-K dated July 7, 1997,
Commission File No. 1-7806, and incorporated herein by
reference.)
4.12 Form of 7.60% Note due July 1, 2097. (Filed as Exhibit 4.2 to
FedEx's Current Report on Form 8-K dated July 7, 1997,
Commission File No. 1-7806, and incorporated herein by
reference.)
E-2
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
4.13 Pass Through Trust Agreement dated as of February 1, 1993, as
amended and restated as of October 1, 1995, between FedEx and
BONY, as Pass Through Trustee, relating to FedEx's 1993 Pass
Through Certificates, Series A1, A2, B1, B2, C1 and C2, 1995
Pass Through Certificates, Series A1, A2, B1, B2 and B3 and
1996 Pass Through Certificates, Series A1 and A2. (Filed as
Exhibit 4.a.1 to FedEx's Current Report on Form 8-K dated
October 26, 1995, Commission File No. 1-7806, and incorporated
herein by reference.)
4.14 Form of 8.04% and 8.76% 1993 Pass Through Certificates, Series
A1 and A2 due November 22, 2007 and May 22, 2015, respectively.
(Filed as Exhibit 4(a)(2) to FedEx's Current Report on Form 8-K
dated February 4, 1993, Commission File No. 1-7806, and
incorporated herein by reference.)
4.15 Form of 6.68% and 7.63% 1993 Pass Through Certificates, Series
B1 and B2 due January 1, 2008 and January 1, 2015,
respectively. (Filed as Exhibit 4.a.2 to FedEx's Current Report
on Form 8-K dated September 23, 1993, Commission File No.
1-7806, and incorporated herein by reference.)
4.16 Form of 7.15% and 7.96% 1993 Pass Through Certificates, Series
C1 and C2 due September 28, 2012 and March 28, 2017,
respectively. (Filed as Exhibit 4.a.2 to FedEx's Current Report
on Form 8-K dated December 2, 1993, Commission File No. 1-7806,
and incorporated herein by reference.)
4.17 Form of 7.63% and 8.06% 1995 Pass Through Certificates, Series
A1 and A2 due January 5, 2014 and January 5, 2016,
respectively. (Filed as Exhibit 4.a.2 to FedEx's Current Report
on Form 8-K dated August 16, 1995, Commission File No. 1-7806,
and incorporated herein by reference.)
4.18 Form of 6.05%, 7.11% and 7.58% 1995 Pass Through Certificates,
Series B1, B2 and B3 due March 19, 1996, January 2, 2014 and
July 2, 2019, respectively. (Filed as Exhibit 4.a.2 to FedEx's
Current Report on Form 8-K dated October 26, 1995, Commission
File No. 1-7806, and incorporated herein by reference.)
4.19 Form of 7.85% and 8.17% 1996 Pass Through Certificates, Series
A1 and A2 due January 30, 2015 and January 30, 2018,
respectively. (Filed as Exhibit 4.a.2 to FedEx's Current Report
on Form 8-K dated June 5, 1996, Commission File No. 1-7806, and
incorporated herein by reference.)
4.20 Pass Through Trust Agreement dated as of March 1, 1994 between
FedEx and BONY, as Pass Through Trustee, relating to FedEx's
1994 Pass Through Certificates, Series A310-A1, A310-A2 and
A310-A3. (Filed as Exhibit 4.a.1 to FedEx's Current Report on
Form 8-K dated March 16, 1994, Commission File No. 1-7806, and
incorporated herein by reference.)
4.21 Form of 7.53%, 7.89% and 8.40% 1994 Pass Through Certificates,
Series A310-A1, A310-A2 and A310-A3 due September 23, 2006,
September 23, 2008 and March 23, 2010, respectively. (Filed as
Exhibit 4.a.2 to FedEx's Current Report on Form 8-K dated March
16, 1994, Commission File No. 1-7806, and incorporated herein
by reference.)
E-3
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
4.22 Pass Through Trust Agreement dated as of June 1, 1996 between
FedEx and State Street Bank and Trust Company, as Pass Through
Trustee, relating to FedEx's 1996 Pass Through Certificates,
Series B1 and B2. (Filed as Exhibit 4(a)(1) to FedEx's
Registration Statement No. 333-07691 on Form S-3 and
incorporated herein by reference.)
4.23 Form of 7.39% and 7.84% 1996 Pass Through Certificates, Series
B1 and B2 due January 30, 2013 and January 30, 2018,
respectively. (Filed as Exhibit 4.a.2 to FedEx's Current Report
on Form 8-K dated October 17, 1996, Commission File No. 1-7806,
and incorporated herein by reference.)
4.24 Pass Through Trust Agreement dated as of May 1, 1997 between
FedEx and First Security Bank, National Association, as Pass
Through Trustee. (Filed as Exhibit 4.a.3 to FedEx's Form 8-K
dated May 12, 1997, Commission File No. 1-7806, and
incorporated herein by reference.)
4.25 Form of 7.50%, 7.52% and 7.65% 1997-1 Pass Through
Certificates, Class A, B and C due January 15, 2018, January
15, 2018 and January 15, 2014, respectively. (Filed as Exhibit
4.a.2 to FedEx's Current Report on Form 8-K dated May 22, 1997,
Commission File No. 1-7806, and incorporated herein by
reference.)
4.26 Form of 6.72%, 6.845% and 7.02% 1998-1 Pass Through
Certificates, Class A, B and C due January 15, 2022, January
15, 2019 and January 15, 2016, respectively. (Filed as Exhibit
4.a.3 to FedEx's Current Report on Form 8-K dated June 30,
1998, Commission File No. 1-7806, and incorporated herein by
reference.)
4.27 Pass Through Trust Agreement dated as of June 1, 1999 between
FedEx and the Bank of New York, as Pass Through Trustee. (Filed
as Exhibit 4(a)(1) to FedEx's Registration Statement
No. 333-80001 on Form S-3 and incorporated herein by
reference.)
4.28 Form of 7.65%, 7.90% and 8.25% 1999-1 Pass Through Certificates
Class A, B and C due January 15,2023, January 15, 2020 and
January 15, 2019, respectively. (Filed as Exhibit 4(a)(2) to
FedEx's Registration Statement No. 333-80001 on Form S-3 and
incorporated herein by reference.)
10.1 Indenture dated as of August 1, 1979 between the Memphis-Shelby
County Airport Authority (the "Authority") and BONY, as
Trustee. (Refiled as Exhibit 10.1 to FedEx's FY90 Annual Report
on Form 10-K, Commission File No. 1-7806, and incorporated
herein by reference.)
10.2 Second Supplemental Indenture dated as of May 1, 1982 between
the Authority and BONY. (Refiled as Exhibit 10.2 to FedEx's
FY93 Annual Report on Form 10-K, Commission File No. 1-7806,
and incorporated herein by reference.)
10.3 Third Supplemental Indenture dated as of November 1, 1982
between the Authority and BONY. (Refiled as Exhibit 10.3 to
FedEx's FY93 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)
10.4 Fourth Supplemental Indenture dated as of December 1, 1984
between the Authority and BONY relating to 7 7/8% Special
Facilities Revenue Bonds, Series 1984 due September 1, 2009.
(Refiled as Exhibit 10.4 to FedEx's FY95 Annual Report on Form
10-K, Commission File No. 1-7806, and incorporated herein by
reference.)
E-4
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
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10.5 Fifth Supplemental Indenture dated as of July 1, 1992 between
the Authority and BONY relating to 6 3/4% Special Facilities
Revenue Bonds, Refunding Series 1992 due September 1, 2012.
(Filed as Exhibit 10.5 to FedEx's FY92 Annual Report on Form
10-K, Commission File No. 1-7806, and incorporated herein by
reference.)
10.6 Sixth Supplemental Indenture dated as of July 1, 1997 between
the Authority and BONY relating to 5.35% Special Facilities
Revenue Bonds, Refunding Series 1997 due September 1, 2012.
(Filed as Exhibit 10.6 to FedEx's FY97 Annual Report on Form
10-K, Commission File No. 1-7806, and incorporated herein by
reference.)
10.7 Guaranty dated as of August 1, 1979 from FedEx to BONY.
(Refiled as Exhibit 10.5 to FedEx's FY90 Annual Report on Form
10-K, Commission File No. 1-7806, and incorporated herein by
reference.)
10.8 Reaffirmation of Guaranty dated as of May 1, 1982 from FedEx to
BONY. (Refiled as Exhibit 10.7 to FedEx's FY93 Annual Report on
Form 10-K, Commission File No. 1-7806, and incorporated herein
by reference.)
10.9 Reaffirmation of Guaranty dated as of December 1, 1984 from
FedEx to BONY relating to Special Facilities Revenue Bonds,
Series 1984. (Refiled as Exhibit 10.10 to FedEx's FY93 Annual
Report on Form 10-K, Commission File No. 1-7806, and
incorporated herein by reference.)
10.10 Reaffirmation of Guaranty dated as of July 30, 1992 from FedEx
to BONY relating to Special Facilities Revenue Bonds, Refunding
Series 1992. (Filed as Exhibit 10.11 to FedEx's FY92 Annual
Report on Form 10-K, Commission File No. 1-7806, and
incorporated herein by reference.)
10.11 Reaffirmation of Guaranty dated as of July 1, 1997 from FedEx
to BONY relating to Special Facilities Revenue Bonds, Refunding
Series 1997. (Filed as Exhibit 10.11 to FedEx's FY97 Annual
Report on Form 10-K, Commission File No. 1-7806, and
incorporated herein by reference.)
10.12 Consolidated and Restated Lease Agreement dated as of August 1,
1979 between the Authority and FedEx. (Refiled as Exhibit 10.12
to FedEx's FY90 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)
10.13 First Supplemental Lease Agreement dated as of April 1, 1981
between the Authority and FedEx. (Filed as Exhibit 10.13 to
FedEx's FY92 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)
10.14 Second Supplemental Lease Agreement dated as of May 1, 1982
between the Authority and FedEx. (Refiled as Exhibit 10.14 to
FedEx's FY93 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)
E-5
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
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10.15 Third Supplemental Lease Agreement dated November 1, 1982
between the Authority and FedEx. (Filed as Exhibit 28.22 to
FedEx's FY93 Second Quarter Report on Form 10-Q, Commission
File No. 1-7806, and incorporated herein by reference.)
10.16 Fourth Supplemental Lease Agreement dated July 1, 1983 between
the Authority and FedEx. (Filed as Exhibit 28.23 to FedEx's
FY93 Second Quarter Report on Form 10-Q, Commission File No.
1-7806, and incorporated herein by reference.)
10.17 Fifth Supplemental Lease Agreement dated February 1, 1984
between the Authority and FedEx. (Filed as Exhibit 28.24 to
FedEx's FY93 Second Quarter Report on Form 10-Q, Commission
File No. 1-7806, and incorporated herein by reference.)
10.18 Sixth Supplemental Lease Agreement dated April 1, 1984 between
the Authority and FedEx. (Filed as Exhibit 28.25 to FedEx's
FY93 Second Quarter Report on Form 10-Q, Commission File No.
1-7806, and incorporated herein by reference.)
10.19 Seventh Supplemental Lease Agreement dated June 1, 1984 between
the Authority and FedEx. (Filed as Exhibit 28.26 to FedEx's
FY93 Second Quarter Report on Form 10-Q, Commission File No.
1-7806, and incorporated herein by reference.)
10.20 Eighth Supplemental Lease Agreement dated July 1, 1988 between
the Authority and FedEx. (Filed as Exhibit 28.27 to FedEx's
FY93 Second Quarter Report on Form 10-Q, Commission File No.
1-7806, and incorporated herein by reference.)
10.21 Ninth Supplemental Lease Agreement dated July 12, 1989 between
the Authority and FedEx. (Filed as Exhibit 28.28 to FedEx's
FY93 Second Quarter Report on Form 10-Q, Commission File No.
1-7806, and incorporated herein by reference.)
10.22 Tenth Supplemental Lease Agreement dated October 1, 1991
between the Authority and FedEx. (Filed as Exhibit 28.29 to
FedEx's FY93 Second Quarter Report on Form 10-Q, Commission
File No. 1-7806, and incorporated herein by reference.)
10.23 Eleventh Supplemental Lease Agreement dated as of July 1, 1994
between the Authority and FedEx. (Filed as Exhibit 10.21 to
FedEx's FY96 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)
10.24 Twelfth Supplemental Lease Agreement dated July 1, 1993 between
the Authority and FedEx. (Filed as Exhibit 10.23 to FedEx's
FY93 Annual Report on Form 10-K, Commission File No. 1-7806,
and incorporated herein by reference.)
10.25 Thirteenth Supplemental Lease Agreement dated as of June 1,
1995 between the Authority and FedEx. (Filed as Exhibit 10.23
to FedEx's FY96 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)
E-6
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
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10.26 Fourteenth Supplemental Lease Agreement dated as of January 1,
1996 between the Authority and FedEx. (Filed as Exhibit 10.24
to FedEx's FY96 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)
10.27 Fifteenth Supplemental Lease Agreement dated as of January 1,
1997 between the Authority and FedEx. (Filed as Exhibit 10.1 to
FedEx's FY97 Third Quarter Report on Form 10-Q, Commission File
No. 1-7806, and incorporated herein by reference.)
10.28 Sixteenth Supplemental Lease Agreement dated as of April 1,
1997 between the Authority and FedEx (Filed as Exhibit 10.28 to
FedEx's FY97 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)
10.29 Seventeenth Supplemental Lease Agreement dated as of May 1,
1997 between the Authority and FedEx. (Filed as Exhibit 10.29
to FedEx's FY97 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)
10.30 Special Facility Lease Agreement dated as of August 1, 1979
between the Authority and FedEx. (Refiled as Exhibit 10.15 to
FedEx's FY90 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)
10.31 First Special Facility Supplemental Lease Agreement dated as of
May 1, 1982 between the Authority and FedEx. (Filed as Exhibit
10.25 to FedEx's FY93 Annual Report on Form 10-K, Commission
File No. 1-7806, and incorporated herein by reference.)
10.32 Second Special Facility Supplemental Lease Agreement dated as
of November 1, 1982 between the Authority and FedEx. (Filed as
Exhibit 10.26 to FedEx's FY93 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.33 Third Special Facility Supplemental Lease Agreement dated as of
December 1, 1984 between the Authority and FedEx. (Refiled as
Exhibit 10.25 to FedEx's FY95 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.34 Fourth Special Facility Supplemental Lease Agreement dated as
of July 1, 1992 between the Authority and FedEx. (Filed as
Exhibit 10.20 to FedEx's FY92 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.35 Fifth Special Facility Supplemental Lease Agreement dated as of
July 1, 1997 between the Authority and FedEx. (Filed as Exhibit
10.35 to FedEx's FY97 Annual Report on Form 10-K, Commission
File No. 1-7806, and incorporated herein by reference.)
10.36 Special Facility Lease Agreement dated as of July 1, 1993
between the Authority and FedEx. (Filed as Exhibit 10.29 to
FedEx's FY93 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)
E-7
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10.37 Special Facility Ground Lease Agreement dated as of July 1,
1993 between the Authority and FedEx. (Filed as Exhibit 10.30
to FedEx's FY93 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)
10.38 Indenture dated as of July 1, 1993 between the Authority and
BONY, as Trustee, relating to 6.20% Special Facility Revenue
Bonds, Series 1993, due July 1, 2014. (Filed as Exhibit 10.31
to FedEx's FY93 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)
10.39 Guaranty dated as of July 1, 1993 from FedEx to BONY relating
to 6.20% Special Facility Revenue Bonds, Series 1993. (Filed as
Exhibit 10.32 to FedEx's FY93 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.40 Lease Agreement dated as of May 7, 1985 between the City of
Oakland and FedEx. (Filed as Exhibit 28.5 to FedEx's FY93
Second Quarter Report on Form 10-Q, Commission File No. 1-7806,
and incorporated herein by reference.)
10.41 Affirmative Action Agreement dated as of May 14, 1985, to Lease
Agreement dated May 7, 1985, between the City of Oakland and
FedEx. (Filed as Exhibit 28.6 to FedEx's FY93 Second Quarter
Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)
10.42 First Supplemental Agreement dated August 5, 1986, to Lease
Agreement dated May 7, 1985, between the City of Oakland and
FedEx. (Filed as Exhibit 28.7 to FedEx's FY93 Second Quarter
Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)
10.43 Second Supplemental Agreement dated February 17, 1987, to Lease
Agreement dated May 7, 1985, between the City of Oakland and
FedEx. (Filed as Exhibit 28.8 to FedEx's FY93 Second Quarter
Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)
10.44 Third Supplemental Agreement dated February 1989, to Lease
Agreement dated May 7, 1985, between the City of Oakland and
FedEx. (Filed as Exhibit 28.9 to FedEx's FY93 Second Quarter
Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)
10.45 Amendment dated August 1, 1989, to Lease Agreement dated May 7,
1985, between the City of Oakland and FedEx. (Refiled as
Exhibit 10.40 to FedEx's FY95 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.46 Lease and First Right of Refusal Agreement dated July 22, 1988
between the State of Alaska, Department of Transportation and
Public Facilities and FedEx. (Filed as Exhibit 28.10 to FedEx's
FY93 Second Quarter Report on Form 10-Q, Commission File No.
1-7806, and incorporated herein by reference.)
E-8
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10.47 Development Agreement dated July 22, 1988, to Lease and First
Right of Refusal Agreement dated July 22, 1988, between the
State of Alaska, Department of Transportation and Public
Facilities and FedEx. (Filed as Exhibit 28.11 to FedEx's FY93
Second Quarter Report on Form 10-Q, Commission File No. 1-7806,
and incorporated herein by reference.)
10.48 Supplement No. 1 dated May 19, 1989, to Development Agreement
dated July 22, 1988, between the State of Alaska, Department of
Transportation and Public Facilities and FedEx. (Filed as
Exhibit 28.12 to FedEx's FY93 Second Quarter Report on Form
10-Q, Commission File No. 1-7806, and incorporated herein by
reference.)
10.49 Supplement No. 1 dated July 19, 1989, to Lease and First Right
of Refusal Agreement dated July 22, 1988, between the State of
Alaska, Department of Transportation and Public Facilities and
FedEx. (Filed as Exhibit 28.13 to FedEx's FY93 Second Quarter
Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)
10.50 Right-of-Way Agreement dated September 19, 1989, to Lease and
First Right of Refusal Agreement dated July 22, 1988, between
the State of Alaska, Department of Transportation and Public
Facilities and FedEx. (Filed as Exhibit 28.14 to FedEx's FY93
Second Quarter Report on Form 10-Q, Commission File No. 1-7806,
and incorporated herein by reference.)
10.51 Supplement No. 2 dated April 23, 1991, to Lease and First Right
of Refusal Agreement dated July 22, 1988, between the State of
Alaska, Department of Transportation and Public Facilities and
FedEx. (Filed as Exhibit 28.15 to FedEx's FY93 Second Quarter
Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)
10.52 Lease Agreement dated October 1, 1983 between The Port
Authority of New York and New Jersey and FedEx. (Filed as
Exhibit 28.16 to FedEx's FY93 Second Quarter Report on Form
10-Q, Commission File No. 1-7806, and incorporated herein by
reference.)
10.53 Supplement No. 1 dated October 1, 1983 to Lease Agreement
dated October 1, 1983 between The Port Authority of New York
and New Jersey and FedEx. (Filed as Exhibit 28.17 to FedEx's
FY93 Second Quarter Report on Form 10-Q, Commission File No.
1-7806, and incorporated herein by reference.)
10.54 Supplement No. 2 dated September 1, 1985 to Lease Agreement
dated October 1, 1983 between The Port Authority of New York
and New Jersey and FedEx. (Filed as Exhibit 28.18 to FedEx's
FY93 Second Quarter Report on Form 10-Q, Commission File No.
1-7806, and incorporated herein by reference.)
10.55 Supplement No. 3 dated June 1, 1992 to Lease Agreement dated
October 1, 1983 between The Port Authority of New York and New
Jersey and FedEx. (Filed as Exhibit 28.19 to FedEx's FY93
Second Quarter Report on Form 10-Q, Commission File No. 1-7806,
and incorporated herein by reference.)
E-9
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10.56 Supplement No. 4 dated March 1, 1993 to Lease Agreement dated
October 1, 1983 between The Port Authority of New York and New
Jersey and FedEx. (Filed as Exhibit 10.51 to FedEx's FY95
Annual Report on Form 10-K, Commission File No. 1-7806, and
incorporated herein by reference.)
10.57 Supplement No. 5 dated February 1, 1994 to Lease Agreement
dated October 1, 1983 between The Port Authority of New York
and New Jersey and FedEx. (Filed as Exhibit 10.52 to FedEx's
FY95 Annual Report on Form 10-K, Commission File No. 1-7806,
and incorporated herein by reference.)
10.58 Amended and Restated Land Lease Agreement dated August 1993
between FedEx and the Indianapolis Airport Authority. (Filed as
Exhibit 10.52 to FedEx's FY94 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.59 Indenture dated as of September 1, 1993 between the City of
Indianapolis, Indiana and NBD Bank, N.A., as Trustee, relating
to the City of Indianapolis Airport Facility Revenue Refunding
Bonds, Series 1994, due April 1, 2017. (Filed as Exhibit 10.1
to FedEx's FY94 First Quarter Report on Form 10-Q, Commission
File No. 1-7806, and incorporated herein by reference.)
10.60 Loan Agreement between the City of Indianapolis and FedEx.
(Filed as Exhibit 10.2 to FedEx's FY94 First Quarter Report on
Form 10-Q, Commission File No. 1-7806, and incorporated herein
by reference.)
10.61 Form of Promissory Note to the City of Indianapolis. (Filed as
Exhibit 10.3 to FedEx's FY94 First Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.62 Indenture dated as of October 1, 1994 between the Indianapolis
Airport Authority and NBD Bank, N. A., as Trustee, relating to
7.10% Special Facilities Revenue Bonds, Series 1994 due January
15, 2017. (Filed as Exhibit 10.1 to FedEx's FY95 Second Quarter
Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)
10.63 Guaranty dated as of October 1, 1994 from FedEx to NBD Bank,
N.A. relating to 7.10% Special Facilities Revenue Bonds, Series
1994 due January 15, 2017. (Filed as Exhibit 10.2 to FedEx's
FY95 Second Quarter Report on Form 10-Q, Commission File No.
1-7806, and incorporated herein by reference.)
10.64 Land and Special Facilities Lease Agreement dated as of October
1, 1994 between FedEx and the Indianapolis Airport Authority
relating to 7.10% Special Facilities Revenue Bonds, Series 1994
due January 15, 2017. (Filed as Exhibit 10.3 to FedEx's FY95
Second Quarter Report on Form 10-Q, Commission File No. 1-7806,
and incorporated herein by reference.)
E-10
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
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10.65 Lease Agreement dated October 9, 1994 between FedEx and Subic
Bay Metropolitan Authority. (Filed as Exhibit 10.62 to FedEx's
FY95 Annual Report on Form 10-K, Commission File No. 1-7806,
and incorporated herein by reference.)
10.66 Indenture dated as of April 1, 1996 between Alliance Airport
Authority, Inc. and The First National Bank of Chicago, as
Trustee, relating to AllianceAirport Authority, Inc. Special
Facilities Revenue Bonds, Series 1996 (Federal Express
Corporation Project) due April 1, 2021. (Filed as Exhibit 10.66
to FedEx's FY96 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)
10.67 Guaranty dated as of April 1, 1996 from Registrant to The First
National Bank of Chicago relating to AllianceAirport Authority,
Inc. Special Facilities Revenue Bonds, Series 1996 (Federal
Express Corporation Project) due April 1, 2021. (Filed as
Exhibit 10.67 to FedEx's FY96 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.68 Land and Special Facilities Lease Agreement dated as of April
1, 1996 between FedEx and AllianceAirport Authority, Inc.
relating to AllianceAirport Authority, Inc. Special Facilities
Revenue Bonds, Series 1996 (Federal Express Corporation
Project) due April 1, 2021. (Filed as Exhibit 10.68 to FedEx's
FY96 Annual Report on Form 10-K, Commission File No. 1-7806,
and incorporated herein by reference.)
10.69 Assignment and Assumption Agreement dated April 10, 1996
between AllianceAirport Authority, Inc. and the City of Fort
Worth, Texas relating to AllianceAirport Authority, Inc.
Special Facilities Revenue Bonds, Series 1996 (Federal Express
Corporation Project) due April 1, 2021. (Filed as Exhibit 10.69
to FedEx's FY96 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)
10.70 1980 Stock Incentive Plan and Form of Stock Option Agreement
pursuant to 1980 Stock Incentive Plan, as amended. (Filed as
Exhibit 10.59 to FedEx's FY93 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.71 1983 Stock Incentive Plan and Form of Stock Option Agreement
pursuant to 1983 Stock Incentive Plan, as amended. (Filed as an
exhibit to FedEx's Registration Statement No. 2-95720 on Form
S-8 and incorporated herein by reference.)
10.72 1984 Stock Incentive Plan and Form of Stock Option Agreement
pursuant to 1984 Stock Incentive Plan, as amended. (Filed as an
exhibit to FedEx's Registration Statement No. 2-95720 on Form
S-8 and incorporated herein by reference.)
10.73 1987 Stock Incentive Plan and Form of Stock Option Agreement
pursuant to 1987 Stock Incentive Plan, as amended. (Filed as an
exhibit to FedEx's Registration Statement No. 33-20138 on Form
S-8 and incorporated herein by reference.)
E-11
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10.74 1989 Stock Incentive Plan and Form of Stock Option Agreement
pursuant to 1989 Stock Incentive Plan, as amended. (Filed as
Exhibit 10.26 to FedEx's FY90 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.75 1993 Stock Incentive Plan and Form of Stock Option Agreement
pursuant to 1993 Stock Incentive Plan, as amended. (1993 Stock
Incentive Plan was filed as Exhibit A to FedEx's FY93
Definitive Proxy Statement, Commission File No. 1-7806, and
incorporated herein by reference, and the form of stock option
agreement was filed as Exhibit 10.61 to FedEx's FY94 Annual
Report on Form 10-K, Commission File No. 1-7806, and
incorporated herein by reference.)
10.76 Amendment to FedEx's 1980, 1983, 1984, 1987 and 1989 Stock
Incentive Plans. (Filed as Exhibit 10.27 to FedEx's FY90 Annual
Report on Form 10-K, Commission File No. 1-7806, and
incorporated herein by reference.)
10.77 Amendment to FedEx's 1983, 1984, 1987, 1989 and 1993 Stock
Incentive Plans. (Filed as Exhibit 10.63 to FedEx's FY94 Annual
Report on Form 10-K, Commission File No. 1-7806, and
incorporated herein by reference.)
10.78 1995 Stock Incentive Plan and Form of Stock Option Agreement
pursuant to 1995 Stock Incentive Plan. (1995 Stock Incentive
Plan was filed as Exhibit A to FedEx's FY95 Definitive Proxy
Statement, Commission File No. 1-7806, and incorporated herein
by reference, and the form of stock option agreement was filed
as Exhibit 99.2 to FedEx's Registration Statement No. 333-03443
on Form S-8, and incorporated herein by reference.)
10.79 Amendment to FedEx's 1980, 1983, 1984, 1987, 1989, 1993 and
1995 Stock Incentive Plans. (Filed as Exhibit 10.79 to FedEx's
FY97 Annual Report on Form 10-K, Commission File No. 1-7806,
and incorporated herein by reference.)
10.80 1997 Stock Incentive Plan and Form of Stock Option Agreement
pursuant to 1997 Stock Incentive Plan. (1997 Stock Incentive
Plan was filed as Annex E to Joint Proxy Statement/Prospectus
contained in Amendment No. 1 to Registrant's Registration
Statement on Form S-4, Commission File No. 333-39483, and
incorporated herein by reference, and the form of stock option
agreement was filed as Exhibit 99.2 to FedEx's Registration
Statement No. 333-03443 on Form S-8, and incorporated herein by
reference.)
10.81 1986 Restricted Stock Plan and Form of Restricted Stock
Agreement pursuant to 1986 Restricted Stock Plan. (Filed as
Exhibit 10.28 to FedEx's FY90 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.82 1995 Restricted Stock Plan and Form of Restricted Stock
Agreement pursuant to 1995 Restricted Stock Plan. (1995
Restricted Stock Plan filed as Exhibit B to FedEx's FY95
Definitive Proxy Statement, Commission File No. 1-7806, and
incorporated herein by reference, and the Form of Restricted
Stock Agreement was filed as Exhibit 10.80 to FedEx's FY96
Annual Report on Form 10-K, Commission File No. 1-7806, and
incorporated herein by reference.)
E-12
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10.83 1997 Restricted Stock Plan and Form of Restricted Stock
Agreement pursuant to 1997 Restricted Stock Plan. (Filed as
Exhibit 10.82 to FedEx's FY97 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.84 Amendment to 1997 Stock Incentive Plan (Filed as Exhibit A to
Registrant's FY98 Definitive Proxy Statement, Commission File
No. 333-39483, and incorporated herein by reference.)
10.85 FedEx's Amended and Restated Retirement Parity Pension Plan.
(Filed as Exhibit 10.83 to FedEx's FY97 Annual Report on
Form 10-K, Commission File No. 1-7806, and incorporated herein
by reference.)
10.86 Management Performance Bonus Plan. (Description of the
performance bonus plan contained in the Definitive Proxy
Statement for Registrant's 1999 Annual Meeting of Stockholders,
under the heading "Report on Executive Compensation of the
Compensation Committee of the Board of Directors" is
incorporated herein by reference.)
10.87 Long-Term Performance Bonus Plan. (A description of each
long-term performance bonus plan is contained in the Definitive
Proxy Statement for Registrant's 1999 Annual Meeting of
Stockholders, under the heading "Long-Term Incentive Plans -
Awards in Last Fiscal Year" and is incorporated herein by
reference.)
10.88 Purchase Agreement between AVSA and FedEx for purchase of
Airbus A300 aircraft. Confidential treatment has been granted
for confidential commercial and financial information, pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934. (Filed
as Exhibit 10.36 to FedEx's FY91 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.89 Amendment Nos. 1 through 4 to Purchase Agreement dated July 3,
1991 between AVSA and FedEx. Confidential treatment has been
granted for confidential commercial and financial information
contained in this exhibit pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended. (Filed as Exhibits
10.1 through 10.5 to FedEx's FY97 Second Quarter Report on Form
10-Q, Commission File No. 1-7806, and incorporated herein by
reference.)
10.90 Sales Agreement dated April 7, 1995 between FedEx and American
Airlines, Inc. for the purchase of MD11 aircraft. Confidential
treatment has been granted for confidential commercial and
financial information, pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934. (Filed as Exhibit 10.79 to
FedEx's FY95 Annual Report on Form 10-K, Commission File No.
1-7806, and incorporated herein by reference.)
10.91 Amendment No. 1, dated September 19, 1996, to Sales Agreement
dated April 7, 1995 between FedEx and American Airlines, Inc.
(Filed as Exhibit 10.93 to FedEx's FY97 Annual Report on Form
10-K, Commission File No. 1-7806, and incorporated herein by
reference.)
E-13
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10.92 Modification Services Agreement dated September 16, 1996
between McDonnell Douglas Corporation and FedEx. Confidential
treatment has been granted for confidential commercial and
financial information contained in this exhibit pursuant to
Rule 24b-2 under the Securities Exchange Act of 1934, as
amended. (Filed as Exhibit 10.6 to FedEx's FY97 Second Quarter
Report on Form 10-Q, Commission File No. 1-7806, and
incorporated herein by reference.)
10.93 Letter Agreement No. 3 dated July 15, 1997, amending the
Modification Services Agreement dated September 16, 1996,
between McDonnell Douglas and FedEx. Confidential treatment has
been granted for confidential commercial and financial
information contained in this exhibit pursuant to Rule 24b-2
under the Securities Exchange Act of 1934, as amended. (Filed
as Exhibit 10.1 to FedEx's FY98 First Quarter Report on Form
10-Q, Commission File No. 1-7806, and incorporated herein by
reference.)
10.94 Letter Agreement Nos. 5-7 dated January 12, 1998, March 16,
1998 and February 26, 1998, respectively, amending the
Modification Services Agreement dated September 16, 1996,
between McDonnell Douglas Corporation and FedEx. Confidential
treatment has been granted for confidential commercial and
financial information, pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended. (Filed as Exhibits
10.1 through 10.3 to FedEx's FY98 Second Quarter Report on Form
10-Q, Commission File No. 1-7806, and incorporated herein by
reference.)
10.95 Aircraft Sales Agreement dated as of April 21, 1998 between
Flightlease, Ltd. and FedEx. Confidential treatment has been
granted for confidential commercial and financial information,
pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended. (Filed as Exhibit 10.94 to Registrant's FY98
Annual Report on Form 10-K, Commission File No. 333-39483, and
incorporated herein by reference.)
10.96 Credit Agreement dated January 15, 1998 among Registrant and
The First National Bank of Chicago, individually and as agent,
and certain lenders. (Filed as Exhibit 10.1 to Registrant's
FY98 Third Quarter Report on Form 10-Q, Commission File No.
333-39483, and incorporated herein by reference.)
10.97 Amendment No. 1 dated as of December 10, 1998 to Credit
Agreement dated as of January 15, 1998 among Registrant,
The First National Bank of Chicago, as Agent, and certain
Lenders. (Filed as Exhibit 10.2 to Registrant's FY99
Second Quarter Report on Form 10-Q, Commision File No.
333-39483, and incorporated herein by reference.)
10.98 Registrant's Retirement Plan for Outside Directors. (Filed as
Exhibit 10.85 to FedEx's FY97 Annual Report on Form 10-K,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.99 First Amendment to Registrant's Retirement Plan for Outside
Directors. (Filed as Exhibit 10.86 to FedEx's FY97 Annual
Report on Form 10-K, Commission File No. 1-7806, and
incorporated herein by reference.)
10.100 Registrant's Amended and Restated Retirement Plan for Outside
Directors. (Filed as Exhibit 10.87 to FedEx's FY97 Annual
Report on Form 10-K, Commission File No. 1-7806, and
incorporated herein by reference.)
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
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10.101 Eighteenth Supplemental Lease Agreement dated as of July 1,
1997, between the Authority and FedEx. (Filed as Exhibit 10.2
to FedEx's FY98 First Quarter Report on Form 10-Q, Commission
File No. 1-7806, and incorporated herein by reference.)
10.102 Nineteenth Supplemental Lease Agreement dated as of September
1, 1998, between the Authority and FedEx. (Filed as Exhibit
10.1 to FedEx's FY99 Second Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.103 Amendments dated March 19, 1998 and January, 1999, amending the
Sales Agreement dated April 7, 1995, between American Airlines,
Inc. and FedEx. Confidential treatment has been granted for
confidential commercial and financial information, pursuant to
Rule 24b-2 under the Securities Exchange Act of 1934, as
amended. (Filed as Exhibits 10.1 and 10.2, to FedEx's FY99
Third Quarter Report on Form 10-Q, Commission File No. 1-7806,
and incorporated herein by reference.)
10.104 Letter Agreement No. 9 dated January 27, 1999, amending the
Modification Services Agreement dated September 16, 1996,
between McDonnell Douglas Corporation and FedEx. Confidential
treatment has been granted 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's FY99 Third Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
10.105 Amendment No. 1 dated January 22, 1999, amending the
Modification Services Agreement dated September 16, 1996,
between McDonnell Douglas Corporation and FedEx. Confidential
treatment has been granted for confidential commercial and
financial information, pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended. (Filed as Exhibit
10.4 to FedEx's FY99 Third Quarter Report on Form 10-Q,
Commission File No. 1-7806, and incorporated herein by
reference.)
12 Statement re Computation of Ratio of Earnings to Fixed Charges.
13 Registrant's Annual Report to Stockholders for the fiscal year
ended May 31, 1999.
21 Subsidiaries of Registrant.
23.1 Consent of Independent Public Accountants.
23.2 Consent of Independent Auditors.
24 Powers of Attorney.
27 Financial Data Schedule.
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99 Report of Independent Auditors.
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