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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

 

  x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED February 28, 2015

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: 1-7806

FEDERAL EXPRESS CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware   71-0427007

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

3610 Hacks Cross Road Memphis, Tennessee   38125
(Address of principal executive offices)   (ZIP Code)

(901) 369-3600

(Registrant’s telephone number, including area code)

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 whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ¨       Accelerated filer ¨   Non-accelerated filer x    Smaller reporting company ¨
    (Do not check if a smaller reporting company)   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of common stock outstanding as of March 18, 2015 was 1,000. The Registrant is a wholly owned subsidiary of FedEx Corporation, and there is no market for the Registrant’s common stock.

The Registrant meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format permitted by General Instruction H(2).

 

 

 


Table of Contents

FEDERAL EXPRESS CORPORATION

INDEX

 

             PAGE           
PART I. FINANCIAL INFORMATION   

ITEM 1. Financial Statements

  

Condensed Consolidated Balance Sheets
February 28, 2015 and May 31, 2014

     3   

Condensed Consolidated Statements of Income
Three and Nine Months Ended February 28, 2015 and 2014

     5   

Condensed Consolidated Statements of Comprehensive Income
Three and Nine Months Ended February  28, 2015 and 2014

     6   

Condensed Consolidated Statements of Cash Flows
Nine Months Ended February 28, 2015 and 2014

     7   

Notes to Condensed Consolidated Financial Statements

     8   

Report of Independent Registered Public Accounting Firm

     14   

ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition

     15   

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

     23   

ITEM 4. Controls and Procedures

     23   
PART II. OTHER INFORMATION   

ITEM 1. Legal Proceedings

     23   

ITEM 1A. Risk Factors

     23   

ITEM 6. Exhibits

     23   

Signature

     25   

Exhibit Index

     E-1   

Exhibit 12.1

  

Exhibit 15.1

  

Exhibit 31.1

  

Exhibit 31.2

  

Exhibit 32.1

  

Exhibit 32.2

  

EX-101    Instance Document

  

EX-101    Schema Document

  

EX-101    Calculation Linkbase Document

  

EX-101    Presentation Linkbase Document

  

EX-101    Definition Linkbase Document

  

 

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FEDERAL EXPRESS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS)

 

     February 28,
2015

(Unaudited)
     May 31,
2014
 

ASSETS

     

CURRENT ASSETS

     

Cash and cash equivalents

   $ 843      $ 858  

Receivables, less allowances of $93 and $80

     1,532        1,705  

Spare parts, supplies and fuel, less allowances of $196 and $211

     381        395  

Deferred income taxes

     374        401  

Due from parent company and other FedEx subsidiaries

     579        502  

Prepaid expenses and other

     94        103  
  

 

 

    

 

 

 

Total current assets

     3,803        3,964  

PROPERTY AND EQUIPMENT, AT COST

     26,698        25,752  

Less accumulated depreciation and amortization

     12,890        12,272  
  

 

 

    

 

 

 

Net property and equipment

     13,808        13,480  

OTHER LONG-TERM ASSETS

     

Goodwill

     1,464        1,561  

Other assets

     1,046        959  
  

 

 

    

 

 

 

Total other long-term assets

     2,510        2,520  
  

 

 

    

 

 

 
   $   20,121      $   19,964  
  

 

 

    

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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FEDERAL EXPRESS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS, EXCEPT SHARE DATA)

 

     February 28,
2015

(Unaudited)
    May 31,
2014
 

LIABILITIES AND OWNER’S EQUITY

    

CURRENT LIABILITIES

    

Accrued salaries and employee benefits

   $ 890     $ 902  

Accounts payable

     1,181       1,394  

Accrued expenses

     1,019       1,019  

Due to other FedEx subsidiaries

     743       910  
  

 

 

   

 

 

 

Total current liabilities

     3,833       4,225  

LONG-TERM DEBT, LESS CURRENT PORTION

     239       239  

OTHER LONG-TERM LIABILITIES

    

Deferred income taxes

     3,411       3,196  

Pension, postretirement healthcare and other benefit obligations

     1,201       1,208  

Self-insurance accruals

     699       667  

Deferred lease obligations

     566       643  

Deferred gains, principally related to aircraft transactions

     184       203  

Other liabilities

     108       96  
  

 

 

   

 

 

 

Total other long-term liabilities

     6,169       6,013  

COMMITMENTS AND CONTINGENCIES

    

OWNER’S EQUITY

    

Common stock, $0.10 par value; 1,000 shares authorized, issued and outstanding

            

Additional paid-in capital

     608       608  

Retained earnings

     9,627       8,944  

Accumulated other comprehensive loss

     (355     (65
  

 

 

   

 

 

 

Total owner’s equity

     9,880       9,487  
  

 

 

   

 

 

 
   $   20,121     $   19,964  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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FEDERAL EXPRESS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(IN MILLIONS)

 

      Three Months Ended
February 28,
    Nine Months Ended
February 28,
 
      2015     2014     2015     2014  

REVENUES

   $ 6,388     $ 6,426     $ 19,687     $ 19,318  

OPERATING EXPENSES:

        

Salaries and employee benefits

     2,490       2,438       7,337       7,185  

Purchased transportation

     432       440       1,354       1,316  

Rentals and landing fees

     428       425       1,263       1,252  

Depreciation and amortization

     362       371       1,098       1,107  

Fuel

     697       1,010       2,573       2,952  

Maintenance and repairs

     322       271       1,055       884  

Intercompany charges, net

     484       500       1,436       1,494  

Other

     816       845       2,445       2,450  
  

 

 

   

 

 

   

 

 

   

 

 

 
     6,031       6,300       18,561       18,640  
  

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING INCOME

     357       126       1,126       678  

OTHER INCOME (EXPENSE):

        

Interest, net

     5       5       13       17  

Other, net

     (34     (33     (91     (76
  

 

 

   

 

 

   

 

 

   

 

 

 
     (29     (28     (78     (59
  

 

 

   

 

 

   

 

 

   

 

 

 

INCOME BEFORE INCOME TAXES

     328       98       1,048       619  

PROVISION FOR INCOME TAXES

     114       34       365       211  
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME

   $ 214     $ 64     $ 683     $ 408  
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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FEDERAL EXPRESS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(IN MILLIONS)

 

      Three Months Ended
February 28,
    Nine Months Ended
February 28,
 
      2015     2014     2015     2014  

NET INCOME

   $ 214     $ 64     $ 683     $ 408  

OTHER COMPREHENSIVE INCOME (LOSS):

        

Foreign currency translation adjustments, net of tax of $13, $1, $32 and $5

     (146     (26     (294     (60

Amortization of unrealized pension actuarial gains/losses and other, net of tax of $1, $1, $2 and $2

     2             4       3  
  

 

 

   

 

 

   

 

 

   

 

 

 
     (144     (26     (290     (57
  

 

 

   

 

 

   

 

 

   

 

 

 

COMPREHENSIVE INCOME

   $ 70     $ 38     $ 393     $ 351  
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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FEDERAL EXPRESS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(IN MILLIONS)

 

      Nine Months  Ended
February 28,
 
     
      2015     2014  

Operating Activities:

    

Net income

   $ 683     $ 408  

Noncash charges:

    

Depreciation and amortization

     1,098       1,107  

Other, net

     264       200  

Changes in assets and liabilities, net

     (327     (276
  

 

 

   

 

 

 

Cash provided by operating activities

     1,718       1,439  

Investing Activities:

    

Capital expenditures

     (1,644     (1,461

Other

     1       14  
  

 

 

   

 

 

 

Cash used in investing activities

     (1,643     (1,447

Financing Activities:

    

Principal payments on debt

           (3
  

 

 

   

 

 

 

Cash used in financing activities

           (3
  

 

 

   

 

 

 

Effect of exchange rate changes on cash

     (90     (9
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (15     (20

Cash and cash equivalents at beginning of period

     858       769  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 843     $ 749  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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FEDERAL EXPRESS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(1) General

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. These interim financial statements of Federal Express Corporation (“FedEx Express”) have been prepared in accordance with accounting principles generally accepted in the United States and Securities and Exchange Commission instructions for interim financial information, and should be read in conjunction with our Annual Report on Form 10-K for the year ended May 31, 2014 (“Annual Report”). Accordingly, significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed in our Annual Report.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (including normal recurring adjustments) necessary to present fairly our financial position as of February 28, 2015, the results of our operations for the three- and nine-month periods ended February 28, 2015 and 2014 and cash flows for the nine-month periods ended February 28, 2015 and 2014. Operating results for the three- and nine-month periods ended February 28, 2015 are not necessarily indicative of the results that may be expected for the year ending May 31, 2015.

We are a wholly owned subsidiary of FedEx Corporation (“FedEx”) engaged in a single line of business and operate in one business segment – the worldwide express transportation and distribution of goods and documents.

Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2015 or ended May 31 of the year referenced and comparisons are to the corresponding period of the prior year.

EMPLOYEES UNDER COLLECTIVE BARGAINING ARRANGEMENTS. Our pilots, which represent a small number of our total employees, are employed under a collective bargaining agreement. The contract became amendable in March 2013, and the parties are currently in negotiations. In October 2014, we formally requested assistance from the National Mediation Board (“NMB”) to mediate the negotiations. The NMB is the U.S. governmental agency that oversees labor agreements for entities covered by the Railway Labor Act of 1926, as amended (“Railway Labor Act”). The progression of negotiations into the mediation stage has no impact on our operations or our ability to provide highly reliable service to customers. In addition to our pilots, certain non-U.S. employees are unionized.

STOCK-BASED COMPENSATION. FedEx has two types of equity-based compensation: stock options and restricted stock. The key terms of the stock option and restricted stock awards granted under FedEx’s incentive stock plans are set forth in FedEx’s Annual Report.

Our stock-based compensation expense was $9 million for the three-month period ended February 28, 2015 and $35 million for the nine-month period ended February 28, 2015. Our stock-based compensation expense was $7 million for the three-month period ended February 28, 2014 and $31 million for the nine-month period ended February 28, 2014. This amount represents the amount charged to us by FedEx for awards granted to our employees.

LONG-TERM DEBT. Long-term debt, exclusive of capital leases, had a carrying value of $239 million at February 28, 2015 and May 31, 2014 compared with an estimated fair value of $346 million at February 28, 2015 and $326 million at May 31, 2014. The estimated fair values were determined based on quoted market prices and the current rates offered for debt with similar terms and maturities. The fair value of our long-term debt is classified as Level 2 within the fair value hierarchy. This classification is defined as a fair value determined using market-based inputs other than quoted prices that are observable for the liability, either directly or indirectly.

RECENT ACCOUNTING GUIDANCE. New accounting rules and disclosure requirements can significantly impact our reported results and the comparability of our financial statements.

 

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We believe that no other new accounting guidance was adopted or issued during the first nine months of 2015 that is relevant to the readers of our financial statements. However, there are numerous new proposals under development which, if and when enacted, may have a significant impact on our financial reporting, as described in our Annual Report.

(2) Accumulated Other Comprehensive Income

The following table provides changes in accumulated other comprehensive income (“AOCI”), net of tax, reported in our condensed consolidated financial statements for the periods ended February 28 (in millions; amounts in parentheses indicate debits to AOCI):

 

     Three Months Ended     Nine Months Ended  
     2015     2014     2015     2014  

Foreign currency translation gain (loss):

        

Balance at beginning of period

   $ (81   $ 56     $ 67     $ 90  

Translation adjustments

     (146     (26     (294     (60
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

     (227     30       (227     30  
  

 

 

   

 

 

   

 

 

   

 

 

 

Retirement plans adjustments:

        

Balance at beginning of period

     (130     (123     (132     (126

Reclassifications from AOCI

     2             4       3  
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

     (128     (123     (128     (123
  

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated other comprehensive loss at end of period

   $ (355   $ (93   $ (355   $ (93
  

 

 

   

 

 

   

 

 

   

 

 

 

Due to its immateriality, the table presenting details of reclassifications from AOCI has been excluded from this quarterly report.

(3) Retirement Plans

We sponsor or participate in programs that provide retirement benefits to most of our employees. These programs include defined benefit pension plans, defined contribution plans and postretirement healthcare plans. A majority of our employees are covered by the FedEx Corporation Employees’ Pension Plan (“FedEx Plan”), a defined benefit pension plan sponsored by FedEx. Defined contribution plans are in place covering a majority of U.S. employees and certain international employees. We also sponsor or participate in nonqualified benefit plans covering certain of our U.S. employee groups and other pension plans covering certain of our international employees. For more information, refer to the financial statements of FedEx included in its Form 10-Q for the quarter ended February 28, 2015 and in our Annual Report.

 

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Our retirement plans costs for the periods ended February 28 were as follows (in millions):

 

     Three Months Ended      Nine Months Ended  
     2015      2014      2015      2014  

Pension plans sponsored by FedEx

   $ 24      $ 68      $ 72      $ 202  

Other U.S. domestic and international pension plans

     13        13        41        40  

U.S. domestic and international defined contribution plans

     62        60        183        175  

U.S. domestic and international postretirement healthcare plans

     16        15        47        46  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $         115      $         156      $         343      $         463  
  

 

 

    

 

 

    

 

 

    

 

 

 

The components of the net periodic benefit cost of the pension and postretirement healthcare plans currently sponsored by us were individually immaterial for all periods presented. No material contributions were made during the nine months of 2015 or 2014 to pension plans sponsored by us, and we do not expect to make material contributions in 2015.

(4) Commitments

As of February 28, 2015, our purchase commitments under various contracts for the remainder of 2015 and annually thereafter were as follows (in millions):

 

     Aircraft and                
     Aircraft-Related      Other(1)      Total  

2015 (remainder)

   $ 415       $ 31       $ 446  

2016

     1,249         40         1,289  

2017

     1,013         31         1,044  

2018

     1,389         26         1,415  

2019

     1,033         10         1,043  

Thereafter

     4,429         81         4,510  
  

 

 

    

 

 

    

 

 

 

Total

   $ 9,528       $         219       $         9,747  
  

 

 

    

 

 

    

 

 

 

 

(1)

Primarily advertising and promotions contracts.

The amounts reflected in the table above for purchase commitments represent noncancelable agreements to purchase goods or services. As of February 28, 2015, our obligation to purchase four Boeing 767-300 Freighter (“B767F”) aircraft and nine Boeing 777 Freighter (“B777F”) aircraft is conditioned upon there being no event that causes us or our employees not to be covered by the Railway Labor Act. Commitments to purchase aircraft in passenger configuration do not include the attendant costs to modify these aircraft for cargo transport unless we have entered into noncancelable commitments to modify such aircraft. Open purchase orders that are cancelable are not considered unconditional purchase obligations for financial reporting purposes and are not included in the table above.

 

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We had $401 million in deposits and progress payments as of February 28, 2015 on aircraft purchases and other planned aircraft-related transactions. These deposits are classified in the “Other assets” caption of our consolidated balance sheets. Aircraft and aircraft-related contracts are subject to price escalations. The following table is a summary of the key aircraft we are committed to purchase as of February 28, 2015 with the year of expected delivery:

 

         B767F              B777F              Total      

2015 (remainder)

     4                4   

2016

     11        2         13   

2017

     12                12   

2018

     11        2         13   

2019

     6        2         8   

Thereafter

            12         12   
  

 

 

    

 

 

    

 

 

 

Total

     44        18         62   
  

 

 

    

 

 

    

 

 

 

A summary of future minimum lease payments under noncancelable operating leases with an initial or remaining term in excess of one year at February 28, 2015 is as follows (in millions):

 

     Operating Leases  
     Aircraft
  and Related  
Equipment
     Facilities
  and Other  
     Total
  Operating  
Leases
 

2015 (remainder)

   $ 82      $ 175      $ 257  

2016

     461        648        1,109  

2017

     400        821        1,221  

2018

     329        511        840  

2019

     273        442        715  

Thereafter

     550        3,616        4,166  
  

 

 

    

 

 

    

 

 

 

Total

   $ 2,095      $ 6,213      $ 8,308  
  

 

 

    

 

 

    

 

 

 

Future minimum lease payments under capital leases were immaterial at February 28, 2015. While certain of our lease agreements contain covenants governing the use of the leased assets or require us to maintain certain levels of insurance, none of our lease agreements include material financial covenants or limitations.

(5) Contingencies

Environmental Matters. SEC regulations require disclosure of certain environmental matters when a governmental authority is a party to the proceedings and the proceedings involve potential monetary sanctions that management reasonably believes could exceed $100,000.

On January 14, 2014, the U.S. Department of Justice (“DOJ”) issued a Grand Jury Subpoena to FedEx Express relating to an asbestos matter previously investigated by the U.S. Environmental Protection Agency. On May 1, 2014, the DOJ informed us that it had determined to continue to pursue the matter as a criminal case, citing seven asbestos-related regulatory violations associated with removal of roof materials from a hangar in Puerto Rico during cleaning and repair activity, as well as violation of waste disposal requirements. Loss is reasonably possible; however, the amount of any loss is expected to be immaterial.

 

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Department of Justice Indictment — Internet Pharmacy Shipments. In the past, we received requests for information from the DOJ in the Northern District of California in connection with a criminal investigation relating to the transportation of packages for online pharmacies that may have shipped pharmaceuticals in violation of federal law. In July 2014, the DOJ filed a criminal indictment in the United States District Court for the Northern District of California in connection with the matter. A superseding indictment was filed in August 2014. The indictment alleges that FedEx Corporation, FedEx Express and FedEx Services, together with certain pharmacies, conspired to unlawfully distribute controlled substances, unlawfully distributed controlled substances and conspired to unlawfully distribute misbranded drugs. The superseding indictment adds conspiracy to launder money counts related to services provided to and payments from online pharmacies. We continue to believe that our employees have acted in good faith at all times and that we have not engaged in any illegal activities.

Accordingly, we will vigorously defend ourselves in this matter. If we are convicted, remedies could include fines, penalties, forfeiture and compliance conditions. Given the early stage of this proceeding, we cannot estimate the amount or range of loss, if any; however, it is reasonably possible that it could be material if we are convicted.

Other Matters. In August 2010, a third-party consultant who works with shipping customers to negotiate lower rates filed a lawsuit in federal district court in California against FedEx and United Parcel Service, Inc. (“UPS”) alleging violations of U.S. antitrust law. This matter was dismissed in May 2011, but the court granted the plaintiff permission to file an amended complaint, which FedEx received in June 2011. In November 2011, the court granted our motion to dismiss this complaint, but again allowed the plaintiff to file an amended complaint. The plaintiff filed a new complaint in December 2011, and the matter remains pending before the court. In February 2011, shortly after the initial lawsuit was filed, we received a demand for the production of information and documents in connection with a civil investigation by the DOJ into the policies and practices of FedEx and UPS for dealing with third-party consultants who work with shipping customers to negotiate lower rates. In November 2012, the DOJ served a civil investigative demand on the third-party consultant seeking all pleadings, depositions and documents produced in the lawsuit. We are cooperating with the investigation, do not believe that we have engaged in any anti-competitive activities and will vigorously defend ourselves in any action that may result from the investigation. While the litigation proceedings and the DOJ investigation move forward, and the amount of loss, if any, is dependent on a number of factors that are not yet fully developed or resolved, the amount of any loss is expected to be immaterial.

On June 30, 2014, we received a Statement of Objections from the French Competition Authority (“FCA”) addressed to FedEx Express France, formerly known as TATEX, regarding an investigation by the FCA into anticompetitive behavior that is alleged to have occurred primarily in the framework of trade association meetings that included the former general managers of TATEX prior to our acquisition of that company in July 2012. In September 2014, FedEx Express France submitted its observations in response to the Statement of Objections to the FCA. Given the early stage of this matter, we cannot yet determine the amount or range of potential loss; however, it is reasonably possible that it could be material.

FedEx Express and its subsidiaries are subject to other legal proceedings that arise in the ordinary course of their business. In the opinion of management, the aggregate liability, if any, with respect to these other actions will not have a material adverse effect on our financial position, results of operations or cash flows.

(6) Parent/Affiliate Transactions

Affiliate company balances that are currently receivable or payable relate to charges for services provided to or by other FedEx affiliates, which are settled on a monthly basis, or the net activity from participation in FedEx’s consolidated cash management program. In addition, we are allocated net interest on these amounts at market rates.

We maintain an accounts receivable arrangement with FedEx TechConnect, Inc. (“FedEx TechConnect”), a wholly owned subsidiary of FedEx Corporate Services, Inc. (“FedEx Services”). FedEx Services is a wholly owned subsidiary of FedEx. Under this arrangement, we recognize revenue for the transportation services provided to our U.S. customers and factor the related receivables to FedEx TechConnect for collection. We have no continuing involvement with the receivables transferred to FedEx TechConnect. Our net receivables recorded by FedEx TechConnect totaled $1.7 billion at February 28, 2015 and May 31, 2014.

 

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The costs of FedEx Services, FedEx TechConnect and FedEx Office and Print Services, Inc., as well as charges for management fees from our parent, are allocated to us and are included in the expense line item “Intercompany charges, net” based on metrics such as relative revenues or estimated services provided. We believe these allocations approximate the net cost of providing the functions. FedEx allocation methodologies are refined as necessary to reflect changes in our business.

(7) Supplemental Cash Flow Information

Cash paid for interest expense and income taxes for the nine-month periods ended February 28 was as follows (in millions):

 

     2015     2014  

Cash payments for:

    

Income taxes

   $ 428     $ 177  

Income tax refunds received

     (214     (122
  

 

 

   

 

 

 

Cash tax payments, net

   $         214     $         55  
  

 

 

   

 

 

 

 

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REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholder

Federal Express Corporation

We have reviewed the condensed consolidated balance sheet of Federal Express Corporation as of February 28, 2015, and the related condensed consolidated statements of income and comprehensive income for the three-month and nine-month periods ended February 28, 2015 and 2014 and the condensed consolidated statements of cash flows for the nine-month periods ended February 28, 2015 and 2014. These financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Federal Express Corporation as of May 31, 2014, and the related consolidated statements of income, comprehensive income, changes in owner’s equity and cash flows for the year then ended not presented herein, and in our report dated July 14, 2014, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of May 31, 2014, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Ernst & Young LLP

Memphis, Tennessee

March 19, 2015

 

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Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition

GENERAL

The following Management’s Discussion and Analysis of Results of Operations and Financial Condition (“MD&A”), which describes the principal factors affecting the results of operations and financial condition of Federal Express Corporation (“FedEx Express”), is abbreviated pursuant to General Instruction H(2)(a) of Form 10-Q. This discussion should be read in conjunction with the accompanying quarterly unaudited condensed consolidated financial statements and our Annual Report on Form 10-K for the year ended May 31, 2014 (“Annual Report”). Our Annual Report includes additional information about our significant accounting policies, practices and the transactions that underlie our financial results. For additional information, including a discussion of outlook, liquidity, capital resources, contractual cash obligations and critical accounting estimates, see the Quarterly Report on Form 10-Q of our parent, FedEx Corporation (“FedEx”), for the quarter ended February 28, 2015.

We are the world’s largest express transportation company. Our sister company FedEx Corporate Services, Inc. (“FedEx Services”) provides us and our other sister companies, including FedEx Ground Package System, Inc. (“FedEx Ground”), with sales, marketing, information technology, communications and certain back-office support, as well as retail access for our customers through FedEx Office and Print Services, Inc. (“FedEx Office”) and customer service, technical support and billing and collection services through FedEx TechConnect, Inc.

The operating expenses line item “Intercompany charges” on the financial summary represents an allocation that primarily includes salaries and benefits, depreciation and other costs for the sales, marketing, information technology and customer service support provided to us by FedEx Services and FedEx Office’s net operating costs. These costs are allocated based on metrics such as relative revenues or estimated services provided. For the international regions of FedEx Express, similar functions are performed on a regional basis by FedEx Express and reported in expense line items outside of intercompany charges. “Intercompany charges” also includes allocated charges from our parent for management fees related to services received for general corporate oversight, including executive officers and certain legal and finance functions. We believe the total amounts allocated approximate the net cost of providing these functions. FedEx allocation methodologies are refined as necessary to reflect changes in our business.

The key indicators necessary to understand our operating results include:

 

 

the overall customer demand for our various services based on macro-economic factors and the global economy;

 

 

the volume of shipments transported through our network, as measured by our average daily volume and shipment weight;

 

 

the mix of services purchased by our customers;

 

 

the prices we obtain for our services, as measured by yield (revenue per package or pound);

 

 

our ability to manage our cost structure (capital expenditures and operating expenses) to match shifting volume levels; and

 

 

the timing and amount of fluctuations in fuel prices and our ability to offset these fluctuations through our fuel surcharges.

The majority of our operating expenses are directly impacted by revenue and volume levels. Accordingly, we expect these operating expenses to fluctuate on a year-over-year basis consistent with the change in revenues and volumes. Therefore, the discussion of operating expense captions focuses on the key drivers and trends impacting expenses other than changes in revenues and volume.

 

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The line item “Other operating expenses” predominantly includes costs associated with outside service contracts (such as security, facility services and cargo handling), professional fees, uniforms, utilities and insurance.

Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2015 or ended May 31 of the year referenced and comparisons are to the corresponding period of the prior year.

 

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RESULTS OF OPERATIONS

We offer a wide range of U.S. domestic and international shipping services for delivery of packages and freight including priority services, which provide time-definite delivery within one, two or three business days worldwide, and deferred or economy services, which provide time-definite delivery within five business days worldwide. The following tables compare revenues, operating expenses, operating expenses as a percent of revenue, operating income, net income and operating margin (dollars in millions) for the periods ended February 28:

 

     Three Months Ended     Percent     Nine Months Ended     Percent  
     2015     2014     Change     2015     2014     Change  

Revenues:

            

Package:

            

U.S. overnight box

   $ 1,653     $ 1,643       1      $ 5,040     $ 4,852       4   

U.S. overnight envelope

     392       393              1,207       1,210         

U.S. deferred

     895       869       3        2,524       2,369       7   
  

 

 

   

 

 

     

 

 

   

 

 

   

Total U.S. domestic package revenue

     2,940       2,905       1        8,771       8,431       4   
  

 

 

   

 

 

     

 

 

   

 

 

   

International priority

     1,463       1,542       (5     4,742       4,760         

International economy

     560       540       4        1,729       1,639       5   
  

 

 

   

 

 

     

 

 

   

 

 

   

Total international export package revenue

     2,023       2,082       (3     6,471       6,399       1   
  

 

 

   

 

 

     

 

 

   

 

 

   

International domestic(1)

     328       347       (5     1,082       1,077         
  

 

 

   

 

 

     

 

 

   

 

 

   

Total package revenue

     5,291       5,334       (1     16,324       15,907       3   

Freight:

            

U.S.

     580       577       1        1,745       1,786       (2

International priority

     375       379       (1     1,182       1,184         

International airfreight

     45       48       (6     133       157       (15
  

 

 

   

 

 

     

 

 

   

 

 

   

Total freight revenue

     1,000       1,004              3,060       3,127       (2

Other

     97       88       10        303       284       7   
  

 

 

   

 

 

     

 

 

   

 

 

   

Total revenues

     6,388       6,426       (1     19,687       19,318       2   

Operating expenses:

            

Salaries and employee benefits

     2,490       2,438       2        7,337       7,185       2   

Purchased transportation

     432       440       (2     1,354       1,316       3   

Rentals and landing fees

     428       425       1        1,263       1,252       1   

Depreciation and amortization

     362       371       (2     1,098       1,107       (1

Fuel

     697       1,010       (31     2,573       2,952       (13

Maintenance and repairs

     322       271       19        1,055       884       19   

Intercompany charges

     484       500       (3     1,436       1,494       (4

Other

     816       845       (3     2,445       2,450         
  

 

 

   

 

 

     

 

 

   

 

 

   

Total operating expenses

     6,031       6,300       (4     18,561       18,640         
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating income

   $ 357     $ 126       183      $ 1,126     $ 678       66   
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating margin

     5.6     2.0     360 bp      5.7     3.5     220 bp 

Other income (expense):

            

Interest, net

     5       5              13       17       (24

Other, net

     (34     (33     3        (91     (76     20   
  

 

 

   

 

 

     

 

 

   

 

 

   
     (29     (28     4        (78     (59     32   
  

 

 

   

 

 

     

 

 

   

 

 

   

Income before income taxes

     328       98       235        1,048       619       69   

Provision for income taxes

     114       34       235        365       211       73   
  

 

 

   

 

 

     

 

 

   

 

 

   

Net income

   $ 214     $ 64       234      $ 683     $ 408       67   
  

 

 

   

 

 

     

 

 

   

 

 

   

 

(1) 

International domestic revenues represent our international intra-country express operations.

 

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     Percent of Revenue  
     Three Months Ended     Nine Months Ended  
     2015     2014     2015     2014  

Operating expenses:

        

Salaries and employee benefits

     39.0      37.9      37.2      37.2 

Purchased transportation

     6.7       6.8       6.9       6.8  

Rentals and landing fees

     6.7       6.6       6.4       6.5  

Depreciation and amortization

     5.7       5.8       5.6       5.7  

Fuel

     10.9       15.7       13.1       15.3  

Maintenance and repairs

     5.0       4.2       5.4       4.6  

Intercompany charges

     7.6       7.8       7.3       7.7  

Other

     12.8       13.2       12.4       12.7  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     94.4       98.0       94.3       96.5  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating margin

     5.6      2.0      5.7      3.5 
  

 

 

   

 

 

   

 

 

   

 

 

 

The following table compares selected statistics (in thousands, except yield amounts) for the periods ended February 28:

 

     Three Months Ended      Percent     Nine Months Ended      Percent  
     2015      2014      Change     2015      2014      Change  

Package Statistics

                

Average daily package volume (ADV):

                

U.S. overnight box

     1,258        1,202        5       1,243        1,153        8  

U.S. overnight envelope

     516        515               521        538        (3

U.S. deferred

     1,024        984        4       928        871        7  
  

 

 

    

 

 

      

 

 

    

 

 

    

Total U.S. domestic ADV

     2,798        2,701        4       2,692        2,562        5  
  

 

 

    

 

 

      

 

 

    

 

 

    

International priority

     398        399               410        409          

International economy

     175        168        4       175        168        4  
  

 

 

    

 

 

      

 

 

    

 

 

    

Total international export ADV

     573        567        1       585        577        1  
  

 

 

    

 

 

      

 

 

    

 

 

    

International domestic(1)

     831        780        7       854        822        4  
  

 

 

    

 

 

      

 

 

    

 

 

    

Total ADV

     4,202        4,048        4       4,131        3,961        4  
  

 

 

    

 

 

      

 

 

    

 

 

    

Revenue per package (yield):

                

U.S. overnight box

   $ 20.85      $ 21.70        (4   $ 21.34      $ 22.15        (4

U.S. overnight envelope

     12.07        12.09               12.18        11.84        3  

U.S. deferred

     13.88        14.01        (1     14.32        14.31          

U.S. domestic composite

     16.68        17.07        (2     17.15        17.32        (1

International priority

     58.40        61.38        (5     60.79        61.30        (1

International economy

     50.60        51.01        (1     52.03        51.24        2  

International export composite

     56.01        58.30        (4     58.17        58.37          

International domestic(1)

     6.28        7.05        (11     6.67        6.90        (3

Composite package yield

     19.99        20.91        (4     20.80        21.14        (2

Freight Statistics

                

Average daily freight pounds:

                

U.S.

     8,145        8,263        (1     7,831        7,850          

International priority

     2,823        2,823               2,866        2,917        (2

International airfreight

     718        757        (5     673        839        (20
  

 

 

    

 

 

      

 

 

    

 

 

    

Total average daily freight pounds

     11,686        11,843        (1     11,370        11,606        (2
  

 

 

    

 

 

      

 

 

    

 

 

    

Revenue per pound (yield):

                

U.S.

   $ 1.13      $ 1.11        2     $ 1.17      $ 1.20        (3

International priority

     2.11        2.13        (1     2.17        2.14        1  

International airfreight

     1.00        1.00               1.04        0.98        6  

Composite freight yield

     1.36        1.35        1       1.42        1.42          

 

(1) 

International domestic statistics represent our international intra-country express operations.

 

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Revenues

Our revenues declined 1% in the third quarter due to the negative impact of lower fuel surcharges and unfavorable exchange rates. These negative impacts were partially offset by increases in U.S. and international export base yields and volumes. Revenues during the nine months of 2015 increased 2% due to U.S. and international export base yield and volume growth, which were partially offset by lower fuel surcharges and unfavorable exchange rates.

U.S. domestic yields decreased in the third quarter and nine months of 2015 due to the negative impact of lower fuel surcharges, which were partially offset by higher rates. The decrease in international export yields in the third quarter and nine months of 2015 was due to the negative impact of lower fuel surcharges and exchange rates and was partially offset by higher rates and weight per package. U.S. domestic volumes increased 4% in the third quarter and 5% in the nine months of 2015 driven by both our overnight and deferred service offerings.

Operating Income

Our operating income and operating margin increased in the third quarter and nine months of 2015, driven by U.S. domestic and international export base yield and volume growth, the positive net impact of fuel, benefits associated with our profit improvement program, a lower year-over-year weather impact and reduced pension expense. These factors were partially offset by higher maintenance expense and higher incentive compensation accruals.

Within operating expenses, maintenance and repairs expense increased 19% in the third quarter and nine months of 2015 due to the timing of aircraft maintenance events. Salaries and employee benefits increased 2% in the third quarter and nine months of 2015 due to additional staffing to support volume growth and higher incentive compensation accruals, partially offset by the benefits from our voluntary employee severance program and lower pension expense. Higher utilization of third-party transportation providers drove a 3% increase in purchased transportation costs in the nine months of 2015.

Fuel

Fuel expense decreased 31% in the third quarter and 13% in the nine months of 2015 due to lower aircraft fuel prices. However, fuel prices represent only one component of the two factors we consider meaningful in understanding the impact of fuel on our business. Consideration must also be given to the fuel surcharge revenue we collect. Accordingly, we believe discussion of the net impact of fuel on our results, which is a comparison of the year-over-year change in these two factors, is important to understand the impact of fuel on our business. In order to provide information about the impact of fuel surcharges on the trend in revenue and yield growth, we have included the comparative weighted-average fuel surcharge percentages in effect for the third quarter and nine months of 2015 and 2014 below.

The index used to determine our fuel surcharges incorporates a timing lag of approximately six to eight weeks before they are adjusted for changes in fuel prices. For example, the fuel surcharge index in effect in February 2015 was set based on December 2014 fuel prices. In addition, the structure of the table that is used to determine our fuel surcharge does not adjust immediately for changes in fuel price, but allows for the fuel surcharge revenue charged to our customers to remain unchanged as long as fuel prices remain within certain ranges.

Beyond these factors, the manner in which we purchase fuel also influences the net impact of fuel on our results. For example, our contracts for jet fuel purchases are tied to various indices, including the U.S. Gulf Coast index. While many of these indices are aligned, each index may fluctuate at a different pace, driving variability in the prices paid for jet fuel. Furthermore, under these contractual arrangements, approximately 75% of our jet fuel is purchased based on the index price for the preceding week, with the remainder of our purchases tied to the index price for the preceding month, rather than based on daily spot rates. These contractual provisions mitigate the impact of rapidly changing daily spot rates on our jet fuel purchases.

 

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Because of the factors described above, our operating results may be affected should the market price of fuel suddenly change by a significant amount or change by amounts that do not result in an adjustment in our fuel surcharges, which can significantly affect our earnings either positively or negatively in the short-term.

We routinely review our fuel surcharges and our fuel surcharge methodology. On February 2, 2015, we updated the tables used to determine our fuel surcharges.

The net impact of fuel had a significant benefit in the third quarter and nine months of 2015 to operating income. This was driven by decreased fuel prices during the third quarter and nine months of 2015 versus prior year, which was partially offset by the year-over-year decrease in fuel surcharge revenue during these periods.

The net impact of fuel on our operating results does not consider the effects that fuel surcharge levels may have on our business, including changes in demand and shifts in the mix of services purchased by our customers. While fluctuations in fuel surcharge percentages can be significant from period to period, fuel surcharges represent one of the many individual components of our pricing structure that impact our overall revenue and yield. Additional components include the mix of services sold, the base price and extra service charges we obtain for these services and the level of pricing discounts offered. Our U.S. domestic and outbound fuel surcharge and the international fuel surcharges ranged as follows for the periods ended February 28 :

 

     Three Months Ended     Nine Months Ended  
     2015     2014     2015     2014  

U.S. Domestic and Outbound Fuel Surcharge:

        

Low

     3.50      9.00      3.50      8.00 

High

     6.00       10.00       9.50       10.50  

Weighted-average

     4.80       9.49       7.62       9.34  

International Fuel Surcharges:

        

Low

     0.50       13.00       0.50       12.00  

High

     15.00       18.50       18.00       19.00  

Weighted-average

     11.57       16.31       14.49       16.16  

On February 2, 2015, we updated the tables used to determine our fuel surcharges. On September 16, 2014, we announced a 4.9% average list price increase for our U.S. domestic, U.S. export and U.S. import services effective January 5, 2015. In January 2014, we implemented a 3.9% average list price increase for our U.S. domestic, U.S. export and U.S. import services.

Income Taxes

Our effective tax rate was 34.5% for the third quarter of 2015 and 34.8% for the nine months of 2015, compared with 35.0% in the third quarter and 34.1% in the nine months of 2014. Our effective tax rate in the nine months of 2014 was positively impacted by a discrete tax benefit related to the expiration of applicable statute of limitations. For 2015, we expect an effective tax rate between 34.0% and 35.0%. The actual rate, however, will depend on a number of factors, including the amount and source of operating income.

We are subject to taxation in the United States and various U.S. state, local and foreign jurisdictions. Substantially all U.S. federal income tax matters through fiscal year 2011 are concluded, and we are currently under examination by the Internal Revenue Service for the 2012 and 2013 tax years. It is reasonably possible that certain income tax return proceedings will be completed during the next twelve months and could result in a change in our balance of unrecognized tax benefits. The expected impact of any changes would not be material to our consolidated financial statements. As of February 28, 2015, there were no material changes to our liabilities for unrecognized tax benefits from May 31, 2014.

 

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RECENT ACCOUNTING GUIDANCE

New accounting rules and disclosure requirements can significantly impact our reported results and the comparability of our financial statements.

We believe that no other new accounting guidance was adopted or issued during the nine months of 2015 that is relevant to the readers of our financial statements. However, there are numerous new proposals under development which, if and when enacted, may have a significant impact on our financial reporting, as described in our Annual Report.

FORWARD-LOOKING STATEMENTS

Certain statements in this report are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations, cash flows, plans, objectives, future performance and business. Forward-looking statements include those preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believes,” “expects,” “anticipates,” “plans,” “estimates,” “targets,” “projects,” “intends” or similar expressions. These forward-looking statements involve risks and uncertainties. Actual results may differ materially from those contemplated (expressed or implied) by such forward-looking statements, because of, among other things, potential risks and uncertainties, such as:

 

   

economic conditions in the global markets in which we operate;

 

   

significant changes in the volumes of shipments transported through our networks, customer demand for our various services or the prices we obtain for our services;

 

   

damage to our reputation or loss of brand equity;

 

   

disruptions to the Internet or our technology infrastructure, including those impacting our computer systems and website, or data breaches or leakage, including those arising from malware, attempts to penetrate our network or human error, which can adversely affect our operations and reputation among customers;

 

   

the price and availability of jet and vehicle fuel;

 

   

our ability to manage our cost structure for capital expenditures and operating expenses, and match it to shifting and future customer volume levels;

 

   

the impact of intense competition on our ability to maintain or increase our prices (including our fuel surcharges in response to fluctuating fuel price) or to maintain or grow our market share;

 

   

our ability to effectively operate, integrate, leverage and grow acquired businesses, and to continue to support the value we allocate to these acquired businesses, including their goodwill;

 

   

our ability to maintain good relationships with our employees and prevent attempts by labor organizations to organize groups of our employees, which could significantly increase our operating costs and reduce our operational flexibility;

 

   

our ability to execute on our profit improvement programs;

 

   

the impact of any international conflicts or terrorist activities on the United States and global economies in general, the transportation industry or us in particular, and what effects these events will have on our costs or the demand for our services;

 

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any impacts on our businesses resulting from new domestic or international government laws and regulation, including regulatory actions affecting global aviation or other transportation rights, increased air cargo and other security or safety requirements, and tax, accounting, trade (such as protectionist measures enacted in response to weak economic conditions), labor (such as card-check legislation or changes to the Railway Labor Act affecting our employees), environmental (such as global climate change legislation), information security or postal rules;

 

   

adverse weather conditions or localized natural disasters in key geographic areas, such as earthquakes, volcanoes, and hurricanes, which can disrupt our electrical service, damage our property, disrupt our operations, increase our fuel costs and adversely affect our shipment levels;

 

   

any impact on our business from disruptions or modifications in service by the United States Postal Service (“USPS”), which is a significant customer of ours, as a consequence of the USPS’s current financial difficulties or any resulting structural changes to its operations, network, service offerings or pricing;

 

   

increasing costs, the volatility of costs and funding requirements and other legal mandates for employee benefits, especially pension and healthcare benefits;

 

   

the increasing costs of compliance with federal and state governmental agency mandates, including those related to healthcare benefits, and defending against inappropriate or unjustified enforcement of other actions by such agencies;

 

   

changes in foreign currency exchange rates, especially in the Chinese yuan, euro, Brazilian real, Canadian dollar and the British pound, which can affect our sales levels and foreign currency sales prices;

 

   

market acceptance of our new service and growth initiatives;

 

   

any liability resulting from and the costs of defending against class-action litigation, such as wage-and-hour and discrimination and retaliation claims, and any other legal or governmental proceedings;

 

   

the outcome of future negotiations to reach new collective bargaining agreements — including with the union that represents our pilots (the current pilot contract became amendable in March 2013, and the parties are currently in negotiations);

 

   

the impact of technology developments on our operations and on demand for our services, and our ability to continue to identify and eliminate unnecessary information technology redundancy and complexity throughout the organization;

 

   

widespread outbreak of an illness or any other communicable disease, or any other public health crisis;

 

   

availability of financing on terms acceptable to FedEx and FedEx’s ability to maintain its current credit ratings, especially given the capital intensity of our operations; and

 

   

other risks and uncertainties you can find in FedEx’s press releases and SEC filings, including the risk factors identified under the heading “Risk Factors” in “Management’s Discussion and Analysis of Results of Operations and Financial Condition” in our Annual Report, as updated by our quarterly reports on Form 10-Q.

As a result of these and other factors, no assurance can be given as to our future results and achievements. Accordingly, a forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. You should not place undue reliance on forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Omitted under the reduced disclosure format permitted by General Instruction H(2)(c) of Form 10-Q.

 

Item 4. Controls and Procedures

Our management, with the participation of our principal executive and financial officers, has evaluated the effectiveness of our disclosure controls and procedures in ensuring that the information required to be disclosed in our filings under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and financial officers have concluded that such disclosure controls and procedures were effective as of February 28, 2015 (the end of the period covered by this Quarterly Report on Form 10-Q).

During our fiscal quarter ended February 28, 2015, no change occurred in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

For a description of all material pending legal proceedings, see Note 5 of the accompanying unaudited condensed consolidated financial statements.

 

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in our Annual Report (under the heading “Risk Factors” in “Management’s Discussion and Analysis of Results of Operations and Financial Condition”) in response to Part I, Item 1A of Form 10-K.

 

Item 6. Exhibits

 

Exhibit
Number

  

Description of Exhibit

  10.1    Amendment dated December 23, 2014 (but effective as of October 27, 2014), amending the Transportation Agreement dated April 23, 2013 between the United States Postal Service and Federal Express Corporation (the “Transportation Agreement”). Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.1 to FedEx Corporation’s FY15 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
  10.2    Amendment dated December 10, 2014 (but effective as of November 24, 2014), amending the Transportation Agreement. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.2 to FedEx Corporation’s FY15 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)

 

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  10.3    Amendment dated December 23, 2014 (but effective as of January 5, 2015), amending the Transportation Agreement. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.3 to FedEx Corporation’s FY15 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
  10.4    Amendment dated February 19, 2015 (but effective as of December 1, 2014), amending the Transportation Agreement. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.4 to FedEx Corporation’s FY15 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
  10.5    Letter Agreement dated as of January 22, 2015, amending the Boeing 767-3S2 Freighter Purchase Agreement dated as of December 14, 2011 between The Boeing Company and Federal Express Corporation. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.5 to FedEx Corporation’s FY15 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
  12.1    Computation of Ratio of Earnings to Fixed Charges.
  15.1    Letter re: Unaudited Interim Financial Statements.
  31.1    Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2    Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1    Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  32.2    Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.1    Interactive Data Files.

 

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SIGNATURE

Pursuant to the requirements 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.

 

      FEDERAL EXPRESS CORPORATION  
Date: March 19, 2015       /s/ ELISE L. JORDAN  
      ELISE L. JORDAN  
     

SENIOR VICE PRESIDENT AND

CHIEF FINANCIAL OFFICER

 

 

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EXHIBIT INDEX

 

    Exhibit    
    Number    

  

Description of Exhibit

  10.1    Amendment dated December 23, 2014 (but effective as of October 27, 2014), amending the Transportation Agreement dated April 23, 2013 between the United States Postal Service and Federal Express Corporation (the “Transportation Agreement”). Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.1 to FedEx Corporation’s FY15 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
  10.2    Amendment dated December 10, 2014 (but effective as of November 24, 2014), amending the Transportation Agreement. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.2 to FedEx Corporation’s FY15 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
  10.3    Amendment dated December 23, 2014 (but effective as of January 5, 2015), amending the Transportation Agreement. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.3 to FedEx Corporation’s FY15 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
  10.4    Amendment dated February 19, 2015 (but effective as of December 1, 2014), amending the Transportation Agreement. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.4 to FedEx Corporation’s FY15 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
  10.5    Letter Agreement dated as of January 22, 2015, amending the Boeing 767-3S2 Freighter Purchase Agreement dated as of December 14, 2011 between The Boeing Company and Federal Express Corporation. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.5 to FedEx Corporation’s FY15 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
  12.1    Computation of Ratio of Earnings to Fixed Charges.
  15.1    Letter re: Unaudited Interim Financial Statements.
  31.1    Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2    Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1    Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  32.2    Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.1    Interactive Data Files.

 

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