<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTER ENDED AUGUST 31, 1998, 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 of incorporation) (I.R.S. Employer
Identification No.)
6075 Poplar Avenue, Suite 300
Memphis, Tennessee 38119
(Address of principal (Zip Code)
executive offices)
(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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock Outstanding Shares at September 30,
Common Stock, par value $.10 per share 1998
147,553,130
- -------------------------------------------------------------------------------
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<PAGE>
FDX CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
Condensed Consolidated Balance Sheets
August 31, 1998 and May 31, 1998. . . . . . . . . . . . . . . . . . . . 3-4
Condensed Consolidated Statements of Income
Three Months Ended August 31, 1998 and 1997 . . . . . . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows
Three Months Ended August 31, 1998 and 1997 . . . . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . 7-11
Review of Condensed Consolidated Financial Statements
by Independent Public Accountants . . . . . . . . . . . . . . . . . . . 12
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . 13
Management's Discussion and Analysis of Results of Operations
and Financial Condition . . . . . . . . . . . . . . . . . . . . . . . .14-21
PART II. OTHER INFORMATION
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . 22
Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . 22
EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1
</TABLE>
- 2 -
<PAGE>
FDX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
August 31,
1998 May 31,
(Unaudited) 1998
------------ -----------
(In thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents . . . . . . . . . $ 195,181 $ 229,565
Receivables, less allowances of
$64,666,000 and $61,409,000. . . . . . . 1,976,815 1,943,423
Spare parts, supplies and fuel. . . . . . . 351,132 364,714
Deferred income taxes . . . . . . . . . . . 245,508 232,790
Prepaid expenses and other. . . . . . . . . 88,931 109,640
------------ -----------
Total current assets. . . . . . . . . 2,857,567 2,880,132
------------ -----------
Property and Equipment, at Cost. . . . . . . . 12,881,046 12,463,874
Less accumulated depreciation and amortization 6,748,229 6,528,824
------------ -----------
Net property and equipment. . . . . . 6,132,817 5,935,050
------------ -----------
Other Assets:
Goodwill. . . . . . . . . . . . . . . . . . 353,079 356,272
Equipment deposits and other assets . . . . 505,627 514,606
------------ -----------
Total other assets. . . . . . . . . . 858,706 870,878
------------ -----------
$ 9,849,090 $ 9,686,060
------------ -----------
------------ -----------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
- 3 -
<PAGE>
FDX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
August 31,
1998 May 31,
(Unaudited) 1998
------------ -----------
(In thousands)
<S> <C> <C>
Current Liabilities:
Current portion of long-term debt . . . . . $ 265,481 $ 257,529
Accounts payable. . . . . . . . . . . . . . 1,031,691 1,145,410
Salaries, wages and benefits. . . . . . .. 589,304 612,482
Accrued expenses. . . . . . . . . . . . . . 904,922 788,418
------------ -----------
Total current liabilities . . . . . . 2,791,398 2,803,839
------------ -----------
Long-Term Debt, Less Current Portion . . . . . 1,371,302 1,385,180
Deferred Income Taxes. . . . . . . . . . . . . 268,940 274,147
Other Liabilities. . . . . . . . . . . . . . . 1,324,863 1,261,664
Commitments and Contingencies (Notes 6 and 7)
Common Stockholders' Investment:
Common Stock, $.10 par value;
400,000,000 shares authorized,
147,460,802 and 147,410,578 issued. . . 14,746 14,741
Additional paid-in capital. . . . . . . . . 994,518 992,821
Retained earnings . . . . . . . . . . . . . 3,148,733 2,999,354
Deferred compensation . . . . . . . . . . . (24,688) (18,409)
Cumulative foreign currency
translation adjustments. . . . . . . . . (40,722) (27,277)
------------ -----------
Total common stockholders'
investment. . . . . . . . . . . . .. 4,092,587 3,961,230
------------ -----------
$ 9,849,090 $ 9,686,060
------------ -----------
------------ -----------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
- 4 -
<PAGE>
FDX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
August 31,
------------------------
1998 1997
---------- -----------
(In thousands, except
per share amounts)
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . $4,082,302 $3,866,491
Operating Expenses:
Salaries and employee benefits. . . . . . . 1,748,116 1,637,041
Purchased transportation. . . . . . . . . . 371,221 328,706
Rentals and landing fees. . . . . . . . . . 331,559 292,393
Depreciation and amortization . . . . . . . 250,177 230,144
Maintenance and repairs . . . . . . . . . . 248,610 212,599
Fuel . . . . . . . . . . . . . . . . . . 149,431 178,738
Other . . . . . . . . . . . . . . . . . . . 699,345 682,965
---------- -----------
3,798,459 3,562,586
---------- -----------
Operating Income . . . . . . . . . . . . . . . 283,843 303,905
Other Income (Expense):
Interest, net . . . . . . . . . . . . . . . (25,234) (29,668)
Other, net. . . . . . . . . . . . . . . . . (3,261) 10,549
---------- -----------
(28,495) (19,119)
---------- -----------
Income Before Income Taxes . . . . . . . . . . 255,348 284,786
Provision for Income Taxes . . . . . . . . . . 105,969 120,009
---------- -----------
Net Income . . . . . . . . . . . . . . . . . . $ 149,379 $ 164,777
---------- -----------
---------- -----------
Earnings per common share:
Basic . . . . . . . . . . . . . . . . . . . $ 1.01 $ 1.13
---------- -----------
---------- -----------
Assuming dilution . . . . . . . . . . . . . $ 1.00 $ 1.11
---------- -----------
---------- -----------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
- 5 -
<PAGE>
FDX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
August 31,
------------------------
1998 1997
---------- -----------
(In thousands)
<S> <C> <C>
Net Cash Provided by Operating Activities. . . $ 395,901 $ 322,655
Investing Activities:
Purchases of property and equipment, including
deposits on aircraft . . . . . . . . . . (495,238) (388,188)
Proceeds from disposition of property
and equipment:
Sale-leaseback transactions . . . . . - 81,500
Reimbursements of A300 deposits . . . 23,630 85,169
Other dispositions. . . . . . . . . . 11,149 45,796
Proceeds from sale of A300 purchase rights
and other, net . . . . . . . . . . . . . 42,745 17,556
---------- -----------
Net cash used in investing activities. . . . . (417,714) (158,167)
---------- -----------
Financing Activities:
Proceeds from debt issuances. . . . . . . . - 267,105
Principal payments on debt. . . . . . . . . (6,000) (362,846)
Proceeds from stock issuances . . . . . . . 1,597 3,591
Other, net. . . . . . . . . . . . . . . . . (8,168) (7,441)
---------- -----------
Net cash used in financing activities. . . . . (12,571) (99,591)
---------- -----------
Net (decrease) increase in
cash and cash equivalents . . . . . . . . . (34,384) 64,897
Cash and cash equivalents at beginning of period 229,565 161,361
---------- -----------
Cash and cash equivalents at end of period . . $ 195,181 $ 226,258
---------- -----------
---------- -----------
Cash payments for:
Interest (net of capitalized interest). . . $ 22,942 $ 18,332
---------- -----------
---------- -----------
Income taxes. . . . . . . . . . . . . . . . $ 36,228 $ 26,145
---------- -----------
---------- -----------
Non-cash investing and financing activities:
Fair value of assets surrendered under
exchange agreements (with two airlines). $ 10,446 $ 25,741
Fair value of assets acquired under
exchange agreements. . . . . . . . . . . 6,690 31,413
---------- -----------
Fair value of assets receivable (liabilities
incurred) under exchange agreements. . . $ 3,756 $ (5,672)
---------- -----------
---------- -----------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
- 6 -
<PAGE>
FDX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BUSINESS COMBINATION AND BASIS OF PRESENTATION
On January 27, 1998, Federal Express Corporation ("FedEx") and Caliber
System, Inc. ("Caliber") became wholly-owned subsidiaries of a newly-formed
holding company, FDX Corporation (the "Company"). In this transaction, which
was accounted for as a pooling of interests, Caliber shareholders received
0.8 shares of the Company's common stock for each share of Caliber common
stock. Each share of FedEx common stock was automatically converted into one
share of the Company's common stock. There were approximately 146,800,000 of
$0.10 par value shares so issued or converted. The accompanying financial
statements have been restated to include the financial position and results
of operations for both FedEx and Caliber for all periods presented.
Prior to the current fiscal year, Caliber operated on a 13 four-week
period calendar ending December 31 with 12 weeks in each of the first three
quarters and 16 weeks in the fourth quarter. FedEx's fiscal year ending May
31 consists of four, three-month quarters. The Company's consolidated results
of operations and cash flows for the quarter ended August 31, 1997 comprise
Caliber's prior year period from May 25, 1997 to August 16, 1997 consolidated
with FedEx's quarter ended August 31, 1997.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These interim financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information,
the instructions to Quarterly Report on Form 10-Q and Rule 10-01 of
Regulation S-X, and should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended May 31, 1998. Accordingly,
significant accounting policies and other disclosures normally provided have
been omitted since such items are disclosed therein.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments necessary to
present fairly the consolidated financial position of the Company as of
August 31, 1998 and the consolidated results of its operations and its
consolidated cash flows for the three-month periods ended August 31, 1998 and
1997. Operating results for the three-month period ended August 31, 1998 are
not necessarily indicative of the results that may be expected for the year
ending May 31, 1999.
Effective June 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." The
Statement requires the Company to include within its financial statements
information on comprehensive income, which is defined as all activity
impacting equity from non-owner sources. For the Company, comprehensive
income includes net income and foreign currency translation adjustments.
Total comprehensive income, net of taxes, for the three months ended August
31, 1998 and 1997 was $135,934,000 and $160,875,000, respectively.
- 7 -
<PAGE>
Effective June 1, 1998, the Company also adopted Statement of Position
("SOP") 98-1, "Accounting for the Cost of Computer Software Developed or
Obtained for Internal Use." SOP 98-1 provides guidance on accounting for
these costs, requiring certain of them to be capitalized. For the three
months ended August 31, 1998, incremental costs of $7,200,000 were
capitalized.
Certain prior period amounts have been reclassified to conform to the
current presentation.
(3) LONG-TERM DEBT
<TABLE>
<CAPTION>
August 31,
1998 May 31,
(Unaudited) 1998
------------ -----------
(In thousands)
<S> <C> <C>
Unsecured notes payable, interest rates of
7.60% to 10.57%, due through 2098......... $1,247,872 $1,253,770
Unsecured sinking fund debentures, interest
rate of 9.63%, due through 2020........... 98,546 98,529
Capital lease obligations and tax exempt bonds,
interest rates of 5.35% to 7.88%,
due through 2017.......................... 253,425 253,425
Less bond reserves........................ 9,024 9,024
------------ -----------
244,401 244,401
Other debt, interest rates of 9.68% to 9.98%... 45,964 46,009
------------ -----------
1,636,783 1,642,709
Less current portion...................... 265,481 257,529
------------ -----------
$1,371,302 $1,385,180
------------ -----------
------------ -----------
</TABLE>
The Company has a revolving credit agreement with domestic and foreign
banks that provides for a total commitment of $1,000,000,000, all of which
was available at August 31, 1998. This agreement is composed of two parts.
The first part provides for a commitment of $800,000,000 through January 15,
2003. The second part provides for a commitment of $200,000,000 through
January 14, 1999. Interest rates on borrowings under this agreement and
commercial paper borrowings, if any, are generally determined by maturities
selected and prevailing market conditions. Commercial paper borrowings are
backed by unused commitments under this revolving credit agreement and reduce
the amount available under the agreement. Borrowings under this credit
agreement and commercial paper borrowings are classified as long-term based
on the Company's ability and intent to refinance such borrowings.
(4) PREFERRED STOCK
The Certificate of Incorporation authorizes the Board of Directors, at
its discretion, to issue up to 4,000,000 shares of Series Preferred Stock.
The stock is issuable in series which may vary as to certain rights and
preferences and has no par value. As of August 31, 1998, none of these
shares had been issued.
- 8 -
<PAGE>
(5) COMPUTATION OF EARNINGS PER SHARE
The calculation of basic and diluted earnings per share for the
three-month periods ended August 31, 1998 and 1997 was as follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months
Ended August 31,
-----------------------
1998 1997
--------- ----------
<S> <C> <C>
Net income applicable to common
stockholders. . . . . . . . . . . . . . . . $149,379 $164,777
--------- ----------
--------- ----------
Average shares of common stock
outstanding . . . . . . . . . . . . . . . . 147,434 146,337
--------- ----------
--------- ----------
Basic earnings per share . . . . . . . . . . . $ 1.01 $ 1.13
--------- ----------
--------- ----------
Average shares of common stock
outstanding . . . . . . . . . . . . . . . . 147,434 146,337
Common equivalent shares:
Assumed exercise of outstanding
dilutive options . . . . . . . . . . . . 6,358 6,999
Less shares repurchased from proceeds
of assumed exercise of options . . . . . (4,421) (4,627)
--------- ----------
Average common and common
equivalent shares . . . . . . . . . . . . . 149,371 148,709
--------- ----------
--------- ----------
Diluted earnings per share . . . . . . . . . . $ 1.00 $ 1.11
--------- ----------
--------- ----------
</TABLE>
(6) COMMITMENTS
As of August 31, 1998, the Company's purchase commitments for the
remainder of 1999 and annually thereafter under various contracts are as
follows (in thousands):
<TABLE>
<CAPTION>
Aircraft-
Aircraft Related(1) Other(2) Total
-------- ---------- -------- -----
<S> <C> <C> <C> <C>
1999 (remainder) $244,600 $413,400 $471,600 $1,129,600
2000 639,400 578,800 217,100 1,435,300
2001 269,800 509,000 59,600 838,400
2002 240,600 156,200 18,100 414,900
2003 457,400 156,600 - 614,000
</TABLE>
(1) Primarily aircraft modifications, rotables and spare parts and
engines.
(2) Vehicles, facilities, computers and other equipment.
FedEx is committed to purchase nine Airbus A300s, 33 MD11s and 50 Ayres
ALM 200s to be delivered through 2007. Deposits and progress payments of
$70,094,000 have been made toward these purchases.
FedEx has entered into agreements with two airlines to acquire 53 DC10
aircraft, 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 29 additional DC10s
along with additional aircraft engines and equipment.
- 9 -
<PAGE>
During the three-month period ended August 31, 1998, FedEx acquired
three Airbus A300s under operating leases. These aircraft were included as
purchase commitments as of May 31, 1998. At the time of delivery, FedEx sold
its rights to purchase these aircraft to third parties who reimbursed FedEx
for its deposits on the aircraft and paid additional consideration. FedEx
then entered into operating leases with each of the third parties who
purchased the aircraft from the manufacturer.
Lease commitments added since May 31, 1998 for the three Airbus A300s
are as follows (in thousands):
1999 $ 12,900
2000 15,500
2001 15,800
2002 15,900
2003 17,700
Thereafter 336,200
(7) LEGAL PROCEEDINGS
Customers of FedEx have filed four 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. Three of those cases were consolidated in
Minnesota Federal District Court. That court stayed the consolidated cases
in favor of a case filed in Circuit Court of Greene County, Alabama. The
stay was lifted in July 1998. The complaint in the Alabama case also alleges
that FedEx continued to collect the excise tax on the transportation of
property shipped by air after the tax expired again on December 31, 1996.
A fifth case, filed in the Supreme Court of New York, New York County,
containing allegations and requests for relief substantially similar to the
other four cases 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 have
appealed. 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 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 10
years through September 30, 2007.
FedEx intends to vigorously defend itself in these cases. No amount has
been reserved for these contingencies.
- 10 -
<PAGE>
The Company and its subsidiaries are subject to other legal proceedings
and claims which 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 financial position or
results of operations of the Company.
- 11 -
<PAGE>
REVIEW OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BY INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, independent public accountants, has performed a
review of the condensed consolidated balance sheet of the Company as of
August 31, 1998, and the related condensed consolidated statements of income
for the three-month periods ended August 31, 1998 and 1997 and the condensed
consolidated statements of cash flows for the three-month periods ended
August 31, 1998 and 1997, included herein, as indicated in their report
thereon included on page 13.
- 12 -
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of FDX Corporation:
We have reviewed the accompanying condensed consolidated balance sheet
of FDX Corporation and subsidiaries as of August 31, 1998 and the related
condensed consolidated statements of income for the three-month periods ended
August 31, 1998 and 1997 and the condensed consolidated statements of cash
flows for the three-month periods ended August 31, 1998 and 1997. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, 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 financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of FDX Corporation and
subsidiaries as of May 31, 1998 and the related consolidated statements of
income, changes in common stockholders' investment and cash flows for the
year then ended. In our report dated July 8, 1998, we expressed an
unqualified opinion on those financial statements, which are not presented
herein. In our opinion, the accompanying condensed consolidated balance
sheet of FDX Corporation and subsidiaries as of May 31, 1998, is fairly
stated in all material respects in relation to the consolidated balance sheet
from which it has been derived.
Arthur Andersen LLP
Memphis, Tennessee
September 23, 1998
-13-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
For the three months ended August 31, 1998, the Company recorded
consolidated net income of $149 million ($1.00 per share, assuming dilution)
on revenues of $4.1 billion compared with net income of $165 million ($1.11
per share, assuming dilution) on revenues of $3.9 billion for the same period
in the prior year.
The prior year's results included the impact of the Teamsters strike
against United Parcel Service ("UPS") in August 1997. During the 12
operating days of the strike, Federal Express Corporation ("FedEx") delivered
approximately 800,000 additional U.S. domestic express packages per day, and
RPS, Inc. ("RPS") delivered approximately 300,000 additional packages per
day. Although it is difficult to estimate with precision the impact of this
additional volume, FedEx and RPS have retained a portion of this volume. The
Company analytically calculated that the volume not retained at the end of
the first quarter of 1998 contributed approximately $170 million in revenues
and approximately $.25 additional earnings per share to that quarter.
Excluding the strike-related impact, diluted earnings per share for the
quarter rose from $.86 in the prior year to $1.00 in the current year. These
increased earnings per share were achieved primarily through improved results
domestically at FedEx as well as at RPS and Viking Freight, Inc. ("Viking").
Revenues
The following table shows a comparison of revenues (in millions):
<TABLE>
<CAPTION>
First Quarter
Ended
August 31,
-------------------- Percent
1998 1997 Change
--------- -------- ---------
<S> <C> <C> <C>
FedEx:
U.S. domestic express. . . . . . . . $2,423 $2,335 + 4
International Priority (IP). . . . . 725 655 +11
International Express Freight (IXF)
and Airport-to-Airport (ATA). . . 134 151 -11
Charter, Logistics services
and other . . . . . . . . . . . . 135 156 -13
--------- --------
3,417 3,297 + 4
--------- --------
RPS . . . . . . . . . . . . . . . . . . 41 357 +23
Viking. . . . . . . . . . . . . . . . . 95 103 - 7
Other . . . . . . . . . . . . . . . . . 129 110 +18
--------- --------
$4,082 $3,867 + 6
--------- --------
--------- --------
</TABLE>
- 14 -
<PAGE>
The following table shows a comparison of selected operating statistics
(packages, pounds and shipments in thousands):
<TABLE>
<CAPTION>
First Quarter
Ended
August 31,
-------------------- Percent
1998 1997 Change
--------- -------- ---------
<S> <C> <C> <C>
FedEx:
U.S. domestic express:
Average daily packages. . . . . . 2,725 2,692 + 1
Revenue per package . . . . . . . $13.47 $13.55 - 1
IP:
Average daily packages. . . . . . 265 246 + 8
Revenue per package . . . . . . . $41.45 $41.56 -
IXF/ATA:
Average daily pounds. . . . . . . 2,621 2,652 - 1
Revenue per pound . . . . . . . . $ .77 $ .89 -13
Operating weekdays . . . . . . . . . 66 64
RPS:
Average daily packages. . . . . . 1,311 1,231 + 6
Revenue per package . . . . . . . $ 5.25 $ 5.00 + 5
Operating weekdays . . . . . . . . . 64 58
Viking:
Shipments per day . . . . . . . . 12.8 17.0 -25
Revenue per hundredweight . . . . $ 9.64 $ 8.69 +11
Operating weekdays . . . . . . . . . 65 58
</TABLE>
FedEx's U.S. domestic package volume growth was relatively flat
primarily due to the impact of the additional volume during the UPS strike in
the prior year. The majority of the strike-related volume was in the
deferred service category, generally at list price and above average weight
per package. Excluding the revenue and volume associated with the strike and
the proceeds from a temporary fuel surcharge in the prior year, U.S. domestic
average daily package volume and revenue per package (yield) increased 6% and
2% year over year, respectively, in the current quarter. Management expects
total U.S. domestic package volume in 1999 to grow at a lower rate than that
experienced in the past two fiscal years. Management believes that U.S.
domestic yield should remain stable or increase slightly year over year
during the remainder of 1999 due to continued effects of yield-management
actions, including a 3% to 4% rate increase in February 1998. Actual results
may vary depending on the impact of domestic economic conditions, competitive
pricing changes, customer responses to yield-management initiatives and
changing customer demand patterns.
-15-
<PAGE>
FedEx's IP revenue and volume year-over-year growth rates slowed to 11%
and 8% for the quarter, respectively. In the current quarter, which
contained two additional operating days, IP revenue rose 7% on a daily basis.
Slower growth in the current quarter was primarily due to weakness in Asian
markets and was especially evident in U.S. outbound shipments to that region.
Total IP yield remained stable during the quarter compared to the same period
of the prior year. Management expects continued pressure on IP volume and
yield for the remainder of 1999. Actual IP results will depend on
international economic conditions, actions by FedEx's competitors and
regulatory conditions for international aviation rights.
FedEx's airfreight (IXF/ATA) volume, revenue and yield declined year
over year for the quarter. IXF volume (a space-confirmed, time-definite
service) increased 3% for the quarter, but yield declined 12% for the same
period. ATA volume (a lower-priced, space-available service) decreased 9%
for the quarter, with yield lower by 17% for the same period. Management
expects airfreight volume and yield to continue to decline, year over year,
through the balance of 1999. Due to the impact of difficult international
economic conditions on IP and airfreight traffic, management has adjusted the
Company's expansion and aircraft deployment plans accordingly. Actual
airfreight results will, however, depend on international economic
conditions, actions by the Company's competitors, including capacity
fluctuations, and regulatory conditions for international aviation rights.
RPS's year-over-year revenue growth of 23% for the quarter reflected six
additional operating days in the current year's first quarter. The prior
year's revenue included approximately $20 million of UPS strike-related
revenue. After adjusting for the additional operating days and the benefit
of the UPS strike, revenue increased 18% year over year. This revenue growth
is a result of a 12% increase in average daily volume, after adjusting for
the prior year's strike-related volume, and a 5% increase in yield. Yields
improved as a result of various yield-management actions, including a 3.7%
rate increase in February 1998.
Viking's prior year revenues and shipment statistics reflect the
operations of Central Freight Lines Inc., which was sold at the end of June
1997, in conjunction with Viking's restructuring in March 1997. Due to this
divestiture, revenue and shipments declined 17% and 25%, respectively, on a
daily basis considering seven additional operating days in the current year's
first quarter. At the same time, revenue per hundredweight increased 11%
primarily due to the restructuring.
Operating Expenses
Salaries and employee benefits rose 7% for the quarter, primarily due to
higher employment levels associated with volume growth. After adjusting for
prior year items, primarily the additional revenue and salaries and employee
benefits expense associated with the UPS strike and the proceeds from a
temporary fuel surcharge, the increase is consistent with the rate of revenue
growth. Included in the prior year's expense was a $25 million special
appreciation bonus for U.S. operations employees at FedEx for their extra
efforts during the UPS strike and increased provisions under the Company's
performance-based incentive compensation plans.
The increase in purchased transportation for the quarter was primarily
volume related, with the majority of the increase occurring at RPS.
- 16 -
<PAGE>
A 13% increase for the quarter in rentals and landing fees was primarily
due to additional facilities and aircraft leased by FedEx. The current
year's expense includes additional building leases at the Indianapolis and
Alliance-Fort Worth hubs. As of August 31, 1998, FedEx had 89 wide-bodied
aircraft under operating lease compared with 82 as of August 31, 1997. The
prior year's expense was favorably impacted by approximately $9 million of a
$17 million net gain resulting from the destruction of a leased MD11 aircraft
in an accident in July 1997 (described below in Other Income and Expense and
Income Taxes). Management expects year-over-year increases in lease expense
to continue as FedEx enters into additional aircraft rental agreements during
1999 and thereafter. FedEx expects to be able to convert its A300 purchase
commitments into direct operating leases. (See Note 6 of Notes to Condensed
Consolidated Financial Statements.)
Maintenance and repairs expense increased 17% for the quarter primarily
due to higher year-over-year engine maintenance expense on MD11 and B727
aircraft. In the first quarter of 1998, an operating reserve for the
disposition of leased B747 was increased $9 million, with the majority of
this increase recorded as maintenance and repairs expense. Management
believes that maintenance and repairs expense will continue a long-term trend
of year-over-year increases for the foreseeable future due to the increasing
size and age of FedEx's fleet and the variety of aircraft types.
Fuel expense fell 16% for the quarter primarily as a result of a 24%
decline in average jet fuel price per gallon, partially offset by a 10%
increase in jet fuel gallons consumed. The prior year's first quarter fuel
expense included payments made by FedEx under contracts which were designed
to limit FedEx's exposure to fluctuations in jet fuel prices. Effective
August 1, 1997, FedEx lifted its temporary 2% fuel surcharge that had been in
place on certain U.S. domestic and U.S. export shipments. This surcharge was
implemented on February 3, 1997 to mitigate the impact of rising jet fuel
prices.
Other operating expense increased at a lower rate than revenue because
the prior year included incremental expenses associated with the additional
volume during the UPS strike, including temporary manpower and uniforms and
supplies. Other operating expense includes temporary manpower and other
outside service contracts, communications expense and the cost of sales of
engine noise reduction kits.
Operating Income
Including the impact of the UPS strike on prior year results, the
Company's consolidated operating income decreased 7% for the quarter from the
prior year. Excluding the impact of the UPS strike, operating income
increased 15% due to improved results domestically at FedEx, RPS and Viking.
FedEx's U.S. domestic operating income was $205 million and $241 million
for the quarters ended August 31, 1998 and 1997, respectively. The prior
year's operating income included approximately $50 million related to the UPS
strike as well as proceeds from a 2% temporary fuel surcharge through August
1, 1997. Excluding these prior year factors, operating income increased 23%,
cost per package rose 0.9%, yields increased 2% and package volume grew 6%.
Sales of engine noise reduction kits contributed $29 million and $36 million
to U.S. domestic operating income in the first quarter of 1999 and 1998,
respectively. FedEx's U.S. domestic operating margin for the quarter was
8.2%, compared with 9.9% (7.4%, excluding the aforementioned prior year
items) for the same period in the prior year.
- 17 -
<PAGE>
FedEx's international operating income was $14 million for the quarter,
compared with $23 million for the prior year. International operating
results declined as a result of slower IP volume growth and declining
airfreight volumes at a time of year-over-year capacity increases. Fixed
costs associated with the increased capacity, including salaries and employee
benefits and aircraft lease expense, also negatively impacted international
results. In addition, the net effect of foreign currency fluctuations
contributed to the decline in FedEx's international operating income.
FedEx's international operating margin was 1.5% for the quarter compared with
2.7% for the same period in the prior year.
RPS reported operating income of $49 million for the first quarter of
1999, compared with $34 million for the prior year. The current quarter has
six additional operating days as compared to the prior year's first quarter.
The prior year's results include approximately $6 million of operating income
related to the UPS strike. Operating margin increased to 11.0%, compared
with 9.6% for the prior year due to continued package volume growth and
yield-management actions.
Viking's operating income for the quarter was $7 million, compared with
an operating loss of $5 million in the prior year. Prior year results
include the operations of divisions which were subsequently sold or shut
down.
Other Income and Expense and Income Taxes
Net interest expense declined 15% for the quarter due to lower debt
levels at the Company and a slightly higher amount of capitalized interest at
FedEx.
Other, net for the prior year's first quarter included a gain from an
insurance settlement for an MD11 aircraft destroyed in an accident in July
1997. At that time, FedEx realized a net gain of $17 million from the
insurance settlement and the release from certain related liabilities on the
leased aircraft. Approximately $8 million of this gain was recorded in
non-operating income.
FINANCIAL CONDITION
Liquidity
Cash and cash equivalents totaled $195 million at August 31, 1998, a
decrease of $34 million since May 31, 1998. Cash provided from operations
was $396 million for the current quarter compared with $323 million for the
same period in the prior year. The Company currently has a $1.0 billion bank
revolving credit facility that is generally used to finance temporary
operating cash requirements and to provide support for the issuance of
commercial paper. Management believes that cash flow from operations, the
commercial paper program and the bank revolving credit facility will
adequately meet the Company's working capital needs for the foreseeable
future.
Capital Resources
The Company's operations are capital intensive, characterized by
significant investments in aircraft, vehicles, computer and telecommunication
equipment, package handling facilities and sort equipment. The amount and
timing of capital additions depend on various factors including global
economic conditions, volume growth, new or enhanced services, geographical
expansion of services, competition, availability of satisfactory financing
and actions of regulatory authorities.
-18-
<PAGE>
Capital expenditures for the first three months of 1998 totaled $495
million and included one MD11, aircraft modifications, customer automation
and computer equipment and vehicles and ground support equipment. In
comparison, prior year expenditures totaled $388 million and included one
MD11, aircraft modifications, vehicles and ground support equipment and
customer automation and computer equipment. In June 1997, an MD11 purchased
in February 1997 was sold and leased back. For information on the Company's
purchase commitments, see Note 6 of Notes to Condensed Consolidated Financial
Statements.
Proceeds from the disposition of property and equipment for the
year-to-date period ended August 31, 1997 included proceeds from the sale of
Viking's south- western division and other Viking assets in conjunction with
the restructuring of Viking's operations.
Management believes that the capital resources available to the Company
provide flexibility to access the most efficient markets for financing
capital acquisitions, including aircraft, and are adequate for the Company's
future capital needs.
Market Risk Sensitive Instruments and Positions
There have been no material changes in the Company's market risk
sensitive instruments and positions since its disclosure in its Annual Report
on Form 10-K for the year ended May 31, 1998.
YEAR 2000 COMPLIANCE
Introduction
The Company's operating subsidiaries rely heavily on sophisticated
information technology ("IT") for their business operations. For example,
FedEx maintains electronic connections with more than a million customers via
its proprietary products and technologies. The Company's Year 2000 ("Y2K")
computer compliance issues are, therefore, broad and complex. The FedEx Y2K
Project Office, which was established in 1996, coordinates and supports
FedEx's Y2K compliance effort. FedEx has engaged a major international
consulting firm to assist it in its Y2K program management. This consulting
firm has recommended to the Company that the firm extend its Y2K program
management oversight to the Company's other operating subsidiaries. The
Company has adopted this recommendation, and the managers of the operating
subsidiaries are in the process of implementing it. The oversight provided by
the consulting firm to the Company's other operating subsidiaries should add
further controls to the subsidiaries' Y2K compliance schedule and overall Y2K
project management.
The Company's Y2K compliance efforts are focused on business-critical
items. Hardware, software, systems, technologies and applications are
considered "business-critical" if a failure would either have a material
adverse impact on the Company's business, financial condition or results of
operations or involve a safety risk to employees or customers.
Generally, the Company believes that FedEx's Y2K compliance effort is on
schedule. The Y2K compliance efforts of the Company's other operating
subsidiaries are behind schedule, but these companies are in the process of
accelerating their Y2K programs, and both their IT and Non-IT systems are
targeted for Y2K compliance by November 1, 1999.
State of Readiness
FedEx has inventoried all business-critical infrastructure and
applications software (collectively, "IT Systems"). Assessment/Design
(researching the compliance status and determining the impact of, and
renovation requirements for, FedEx IT Systems) and renovation (making FedEx
IT Systems compliant) are approximately 85% and 75% complete, respectively.
Testing, which involves validating compliance, is approximately 65% complete.
Certification, which involves FedEx's independent, internal review to verify
that the appropriate testing process has occurred, is approximately 40%
complete.
- 19 -
<PAGE>
The Company's other operating subsidiaries have completed the inventory
and assessment phases relating to business-critical IT Systems. The remaining
phases relating to IT Systems are underway.
FedEx's IT Systems compliance effort is targeted to be 95% complete by
December 31, 1998 and 100% complete by September 1, 1999. The IT Systems
compliance effort of the Company's other operating subsidiaries is targeted
to be 100% complete by November 1, 1999.
The inventory and assessment phases of FedEx's Y2K program relating to
business-critical purchased hardware and software, customized software
applications, facilities/equipment and other embedded chip systems
(collectively, "Non-IT Systems") are 100% complete. The remaining phases
relating to FedEx's Non-IT Systems are targeted for completion by May 31,
1999. The inventory and assessment phases relating to the Non-IT Systems of
the Company's other operating subsidiaries are targeted for completion by
July 31, 1999, with the remaining phases targeted to be complete by November
1, 1999.
Y2K Interfaces with Material Third Parties
FedEx is making concerted efforts to understand the Y2K status of third
parties (including, among others, domestic and international government
agencies, customs bureaus, U.S. and international airports and air traffic
control systems, vendors and suppliers) whose Y2K non-compliance could either
have a material adverse effect on the Company's business, financial condition
or results of operations or involve a safety risk to employees or customers.
FedEx is actively encouraging Y2K compliance on the part of third parties and
is developing contingency plans in the event of their Y2K non-compliance.
In conjunction with the International Air Transport Association (IATA)
and the Air Transport Association of America (ATA), FedEx is involved in a
global and industry-wide effort to understand the Y2K compliance status of
airports, air traffic systems, customs clearance and other U.S. and
international government agencies, and common vendors and suppliers.
FedEx's vendor and product compliance program includes the following
tasks: assessing vendor compliance status; product testing; tracking vendor
compliance progress; developing contingency plans, including identifying
alternate suppliers, as needed; addressing contract language; replacing,
renovating or upgrading parts; requesting presentations from vendors or
making on-site assessments, as required; and sending questionnaires. Failure
to respond to these questionnaires results in further mail or phone
correspondence, contingency plan development or vendor/product replacement.
The Company's other operating subsidiaries have begun to develop a supply
chain dependency model to assess the risk levels associated with the Y2K
non-compliance of material third parties.
- 20 -
<PAGE>
Testing
FedEx's Y2K testing effort includes functional testing of remedial
measures and regression testing to validate that changes have not altered
existing functionality. FedEx's test plans include sections which define the
scope of the testing effort, roles and responsibilities of test participants,
the test approach planned, software, hardware and data requirements, and test
environments/techniques to be used, as well as other sections defining the
test effort. System functionality is being verified and documented for future
dates.
A separate Y2K mainframe environment has been created to test all
operating system software and program product software. This Y2K environment
is designed to accomplish future date "end to end" testing of the larger
applications and to validate interface communications between applications.
FedEx uses an independent, internal review to verify that the appropriate
testing process has occurred.
Costs to Address Y2K Compliance
Since 1996, the Company has spent approximately $60 million on Y2K
compliance. The Company expects that its Y2K compliance efforts will require
additional expenditures of approximately $90 million through 2000. The
Company's Y2K compliance effort is being funded entirely by internal cash
flows. For the fiscal year ending May 31, 1999, Y2K expenditures should
represent less than 10% of the Company's total IT expense budget. Although
there are opportunity costs to the Company's Y2K compliance efforts,
management believes that no significant information technology projects have
been deferred due to this work.
Contingency Planning and Risks
FedEx has begun developing contingency plans for Y2K non-compliance.
These plans will include identifying alternate suppliers, vendors,
procedures and operational sites, generating supply/equipment lists,
conducting staff training and developing communication plans. A FedEx-wide
contingency planning task force has been formed to ensure appropriate
coverage and coordination of these plans and to integrate these with FedEx's
existing contingency plans. FedEx's goal for completion of key Y2K
contingency plans is January 31, 1999, with all other Y2K contingency plans
targeted for completion by September 30, 1999. FedEx plans to establish a
contingency command and control center by April 30, 1999 to address any
issues caused by Y2K non-compliance, with personnel on call beginning in
November 1999. The Company's other operating subsidiaries are beginning to
formulate their contingency plans for Y2K non-compliance.
Due to the general uncertainty inherent in the Company's Y2K compliance,
mainly resulting from the Company's dependence upon the Y2K compliance of the
government agencies, third-party suppliers, vendors and customers with whom
the Company deals, the Company is unable to determine at this time its most
reasonably likely worst case scenario. While costs related to the lack of Y2K
compliance of third parties, business interruptions, litigation and other
liabilities related to Y2K issues could materially and adversely affect the
Company's business, results of operations and financial condition, the
Company expects its Y2K compliance efforts to reduce significantly the
Company's level of uncertainty about the impact of Y2K issues affecting
both its IT Systems and Non-IT Systems.
Statements in this "Management's Discussion and Analysis of Results of
Operations and Financial Condition" or made by management of the Company
which contain more than historical information may be considered
forward-looking statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995) which are subject to risks and uncertainties.
Actual results may differ materially from those expressed in the
forward-looking statements because of important factors identified in this
section.
- 21 -
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Note 7 Legal Proceedings in Part I is hereby incorporated by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the 1998 Annual Meeting of Stockholders held on September 28, 1998,
the Company's stockholders elected the Class III Directors to serve for a
three-year term expiring at the 2001 Annual Meeting. The tabulation of votes
with respect to each nominee for office was:
Nominee For Withheld
----------------- ----------- -----------
Judith L. Estrin 120,107,112 1,166,795
Philip Greer 120,099,500 1,174,407
J.R. Hyde, III 120,120,469 1,153,438
Frederick W. Smith 120,119,715 1,154,192
The stockholders also approved an amendment to the Company's 1997 Stock
Incentive Plan by a vote of 113,069,137 to 6,375,656 with 1,829,114
abstentions. The stockholders also ratified the Board of Directors'
designation of Arthur Andersen LLP as independent auditors for the fiscal
year ended May 31, 1999 by a vote of 120,635,919 to 305,747 with 332,241
abstentions.
The stockholders defeated a stockholder proposal concerning
declassification of the Board of Directors by a vote of 46,752,739 in favor
of the proposal to 56,295,682 against with 18,225,486 abstentions and broker
non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- -----------------------
<C> <S>
12.1 Computation of Ratio of Earnings to Fixed Charges.
27.1 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K.
No Current Reports on Form 8-K were filed during the quarter ended
August 31, 1998.
-22-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FDX CORPORATION
(Registrant)
Date: October 13, 1998 /s/ JAMES S. HUDSON
---------------------------------------
JAMES S. HUDSON
CORPORATE VICE PRESIDENT
STRATEGIC FINANCIAL PLANNING & CONTROL
(PRINCIPAL ACCOUNTING OFFICER)
-23-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------- -----------------------
<C> <S>
12.1 Computation of Ratio of Earnings to Fixed Charges.
27.1 Financial Data Schedule.
</TABLE>
E-1
<PAGE>
EXHIBIT 12.1
FDX CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
Year Ended May 31, August 31,
-------------------------------------------------------- ----------------------
1994 1995 1996 1997 1998 1997 1998
---------- ---------- ----------- --------- ----------- -------- -----------
(In thousands, except ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income before income taxes . . . . $540,131 $ 693,564 $ 702,094 $425,865 $ 899,518 $284,786 $ 255,348
Add back:
Interest expense, net of
capitalized interest . . . . 152,170 130,923 109,249 110,080 135,696 31,484 27,380
Amortization of debt
issuance costs . . . . . . . 2,860 2,493 1,628 1,328 1,481 337 219
Portion of rent expense
representative of
interest factor. . . . . . . 288,716 333,971 393,775 439,729 508,325 114,262 136,883
---------- ---------- ----------- --------- ----------- -------- -----------
Earnings as adjusted . . . . . . . $983,877 $1,160,951 $1,206,746 $977,002 $1,545,020 $430,869 $ 419,830
---------- ---------- ----------- --------- ----------- -------- -----------
---------- ---------- ----------- --------- ----------- -------- -----------
Fixed Charges:
Interest expense, net of
capitalized interest. . . . . . $152,170 $ 130,923 $ 109,249 $110,080 $ 135,696 $ 31,484 $ 27,380
Capitalized interest . . . . . . . 29,738 27,381 44,654 45,717 33,009 10,721 11,384
Amortization of debt
issuance costs. . . . . . . . . 2,860 2,493 1,628 1,328 1,481 337 219
Portion of rent expense
representative of
interest factor.. . . . . . . . 288,716 333,971 393,775 439,729 508,325 114,262 136,883
---------- ---------- ----------- --------- ----------- -------- -----------
$473,484 $ 494,768 $ 549,306 $596,854 $ 678,511 $156,804 $ 175,866
---------- ---------- ----------- --------- ----------- -------- -----------
---------- ---------- ----------- --------- ----------- -------- -----------
Ratio of Earnings to Fixed Charges 2.1 2.3 2.2 1.6 2.3 2.7 2.4
---------- ---------- ----------- --------- ----------- -------- -----------
---------- ---------- ----------- --------- ----------- -------- -----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS OF
INCOME ON PAGES 3-5 OF THE COMPANY'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDING
AUGUST 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> AUG-31-1998
<CASH> 195,181
<SECURITIES> 0
<RECEIVABLES> 2,041,481
<ALLOWANCES> 64,666
<INVENTORY> 351,132
<CURRENT-ASSETS> 2,857,567
<PP&E> 12,881,046
<DEPRECIATION> 6,748,229
<TOTAL-ASSETS> 9,849,090
<CURRENT-LIABILITIES> 2,791,398
<BONDS> 1,371,302
0
0
<COMMON> 14,746
<OTHER-SE> 4,077,841
<TOTAL-LIABILITY-AND-EQUITY> 9,849,090
<SALES> 0
<TOTAL-REVENUES> 4,082,302
<CGS> 0
<TOTAL-COSTS> 3,798,459
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,234
<INCOME-PRETAX> 255,348
<INCOME-TAX> 105,969
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 149,379
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 1.00
</TABLE>
