<PAGE>
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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, 1999, OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO ______.
COMMISSION FILE NUMBER: 333-39483
FDX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 62-1721435
(State of incorporation) (I.R.S. Employer
Identification No.)
942 South Shady Grove Road
Memphis, Tennessee 38120
(Address of principal (Zip Code)
executive offices)
(901) 818-7200
(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, 1999
Common Stock, par value $.10 per share 298,565,567
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<PAGE>
FDX CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
Condensed Consolidated Balance Sheets
August 31, 1999 and May 31, 1999.................................................. 3-4
Condensed Consolidated Statements of Income
Three Months Ended August 31, 1999 and 1998....................................... 5
Condensed Consolidated Statements of Cash Flows
Three Months Ended August 31, 1999 and 1998....................................... 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........................................................... 14-22
PART II. OTHER INFORMATION
Legal Proceedings...................................................................... 23
Submission of Matters to a Vote of Security Holders.................................... 23
Exhibits and Reports on Form 8-K....................................................... 23
EXHIBIT INDEX.......................................................................... E-1
</TABLE>
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<PAGE>
FDX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
August 31,
1999 May 31,
(Unaudited) 1999
----------- ------------
(In thousands)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................................................. $ 379,723 $ 325,323
Receivables, less allowances of
$78,163,000 and $68,305,000.............................................. 2,144,524 2,153,166
Spare parts, supplies and fuel............................................. 277,252 291,922
Deferred income taxes...................................................... 297,322 290,721
Prepaid expenses and other................................................. 54,228 79,896
----------- -----------
Total current assets................................................... 3,153,049 3,141,028
Property and Equipment, at Cost................................................. 14,091,367 13,719,907
Less accumulated depreciation and amortization............................. 7,402,988 7,160,690
----------- -----------
Net property and equipment............................................. 6,688,379 6,559,217
Other Assets:
Goodwill................................................................... 341,037 344,002
Other...................................................................... 613,246 603,964
----------- -----------
Total other assets..................................................... 954,283 947,966
---------- -----------
$10,795,711 $10,648,211
----------- -----------
----------- -----------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE>
FDX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
August 31,
1999 May 31,
(Unaudited) 1999
----------- ------------
(In thousands)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term debt.......................................... $ 2,573 $ 14,938
Accrued salaries and employee benefits..................................... 623,863 740,492
Accounts payable........................................................... 1,034,490 1,133,952
Accrued expenses........................................................... 1,017,041 895,375
----------- ------------
Total current liabilities.............................................. 2,677,967 2,784,757
Long-Term Debt, Less Current Portion............................................ 1,359,711 1,359,668
Deferred Income Taxes........................................................... 287,606 293,462
Other Liabilities............................................................... 1,651,501 1,546,632
Commitments and Contingencies (Notes 5 and 6)
Common Stockholders' Investment:
Common Stock, $.10 par value;
400,000,000 shares authorized, 298,358,940
and 297,987,200 issued................................................. 29,836 29,799
Additional paid-in capital................................................. 1,067,803 1,061,312
Retained earnings ......................................................... 3,774,831 3,615,797
Accumulated other comprehensive income..................................... (25,978) (24,688)
Deferred compensation and other............................................ (27,566) (18,528)
----------- ------------
Total common stockholders' investment.................................. 4,818,926 4,663,692
----------- ------------
$10,795,711 $10,648,211
----------- ------------
----------- ------------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE>
FDX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
AUGUST 31,
-----------------------
1999 1998
----------- ----------
(In thousands, except
per share amounts)
<S> <C> <C>
Revenues........................................................................ $4,319,977 $4,082,302
Operating Expenses:
Salaries and employee benefits............................................. 1,830,833 1,748,116
Rentals and landing fees................................................... 366,707 331,511
Purchased transportation................................................... 390,308 371,221
Depreciation and amortization.............................................. 277,262 250,177
Maintenance and repairs.................................................... 255,269 247,710
Fuel ...................................................................... 184,460 149,431
Other...................................................................... 731,331 700,293
---------- ---------
4,036,170 3,798,459
---------- ---------
Operating Income................................................................ 283,807 283,843
Other Income (Expense):
Interest, net.............................................................. (20,608) (25,234)
Other, net................................................................. (319) (3,261)
---------- ---------
(20,927) (28,495)
---------- ---------
Income Before Income Taxes...................................................... 262,880 255,348
Provision for Income Taxes...................................................... 103,846 105,969
---------- ---------
Net Income...................................................................... $ 159,034 $ 149,379
---------- ---------
---------- ---------
Earnings per common share:
Basic...................................................................... $ 0.53 $ 0.51
---------- ---------
---------- ---------
Assuming dilution.......................................................... $ 0.52 $ 0.50
---------- ---------
---------- ---------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE>
FDX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
AUGUST 31,
--------------------------
1999 1998
----------- ----------
(In thousands)
<S> <C> <C>
Net Cash Provided by Operating Activities....................... $ 330,120 $ 395,901
Investing Activities:
Purchases of property and equipment........................ (358,195) (495,238)
Proceeds from disposition of property
and equipment:
Reimbursements of A300 and MD11 deposits............... 22,377 23,630
Other dispositions..................................... 83,448 53,823
Other, net................................................. (6,259) 71
----------- ----------
Net cash used in investing activities........................... (258,629) (417,714)
Financing Activities:
Principal payments on debt................................. (12,532) (6,000)
Proceeds from stock issuances.............................. 5,631 1,597
Other, net................................................. (10,190) (8,168)
----------- ----------
Net cash used in financing activities........................... (17,091) (12,571)
----------- ----------
Net increase (decrease) in
cash and cash equivalents.................................. 54,400 (34,384)
Cash and cash equivalents at beginning of period................ 325,323 229,565
----------- ----------
Cash and cash equivalents at end of period...................... $ 379,723 $ 195,181
----------- ----------
----------- ----------
Cash payments for:
Interest (net of capitalized interest)..................... $ 24,323 $ 22,942
----------- ----------
----------- ----------
Income taxes............................................... $ 16,961 $ 36,228
----------- ----------
----------- ----------
Non-cash investing and financing activities:
Fair value of assets surrendered under
exchange agreements (with two airlines).................. $ 11,670 $ 10,446
Fair value of assets acquired under
exchange agreements...................................... 9,674 6,690
----------- ----------
Fair value of assets surrendered in
excess of assets acquired................................ $ 1,996 $ 3,756
----------- ----------
----------- ----------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE>
FDX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) 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, 1999. 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, 1999
and the consolidated results of its operations and cash flows for the
three-month periods ended August 31, 1999 and 1998. Operating results for the
three-month period ended August 31, 1999 are not necessarily indicative of the
results that may be expected for the year ending May 31, 2000.
Certain prior period amounts have been reclassified to conform to the
current presentation.
(2) COMPREHENSIVE INCOME
The following table provides a reconciliation of net income reported in
the Company's consolidated financial statements to comprehensive income:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED AUGUST 31,
-------------------------
1999 1998
--------- ---------
(In thousands)
<S> <C> <C>
Net income................................................... $159,034 $149,379
Other comprehensive income:
Unrealized loss on available-for-sale
securities, net of deferred taxes of $1,572,000.......... (2,459) --
Foreign currency translation adjustments,
net of deferred taxes of $154,000 and
deferred tax benefit of $3,376,000....................... 1,169 (13,445)
--------- ---------
Comprehensive income....................................... $157,744 $135,934
--------- ---------
--------- ---------
</TABLE>
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<PAGE>
(3) COMPUTATION OF EARNINGS PER SHARE
The calculation of basic and diluted earnings per share for the three-month
periods ended August 31, 1999 and 1998 was as follows (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED AUGUST 31,
--------------------------
1999 1998
--------- ----------
<S> <C> <C>
Net income applicable to common
stockholders $159,034 $149,379
--------- ----------
--------- ----------
Average shares of common stock
outstanding 298,170 294,867
--------- ----------
--------- ----------
Basic earnings per share $ 0.53 $ 0.51
--------- ----------
--------- ----------
Average shares of common stock
outstanding 298,170 294,867
Common equivalent shares:
Assumed exercise of outstanding
dilutive options 13,207 12,716
Less shares repurchased from proceeds
of assumed exercise of options (7,535) (8,841)
--------- ----------
Average common and common
equivalent shares 303,842 298,742
--------- ----------
--------- ----------
Earnings per share, assuming dilution $ 0.52 $ 0.50
--------- ----------
--------- ----------
</TABLE>
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<PAGE>
(4) BUSINESS SEGMENT INFORMATION
FDX is a global transportation and logistics provider primarily composed
of FedEx, the world's largest express transportation company, and RPS, a
business-to-business ground small-package carrier. These operating companies
comprise the Company's reportable segments. Other operating companies
included in the FDX portfolio are Viking Freight, Inc., a less-than-truckload
carrier operating principally in the western United States; Roberts Express,
Inc., a critical-shipment carrier; and FDX Logistics, Inc., a contract
logistics provider. Amounts included in Other in the following table also
include certain unallocated corporate items.
The following table provides a reconciliation of reportable segment
revenues and operating income to the Company's consolidated financial statement
totals (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED AUGUST 31,
------------------------------
1999 1998
---------- ----------
<S> <C> <C>
Revenue
FedEx................................. $3,586,806 $3,417,183
RPS................................... 475,896 440,581
Other................................. 257,275 224,538
---------- ----------
$4,319,977 $4,082,302
---------- ----------
---------- ----------
Operating income
FedEx................................. $ 208,943 $ 219,072
RPS................................... 50,513 48,583
Other................................. 24,351 16,188
---------- ----------
$ 283,807 $ 283,843
---------- ----------
---------- ----------
</TABLE>
(5) COMMITMENTS
As of August 31, 1999, the Company's purchase commitments for the
remainder of 2000 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>
2000 (remainder) $199,300 $259,700 $501,100 $960,100
2001 311,700 311,100 72,500 695,300
2002 315,200 359,300 8,500 683,000
2003 378,100 331,800 - 709,900
2004 200,800 142,300 - 343,100
</TABLE>
(1) Primarily aircraft modifications, rotables, spare parts and spare engines.
(2) Vehicles, facilities, computers and other equipment.
FedEx is committed to purchase one A310, two A300s, 30 MD11s and 75 Ayres
ALM 200s to be delivered through 2007. Deposits and progress payments of
$6,217,000 have been made toward these purchases.
FedEx has entered into agreements with two airlines to acquire 53 DC10
aircraft (41 of which had been received as of August 31, 1999), spare parts,
aircraft engines and other equipment, and maintenance services in exchange for a
combination of aircraft engine noise reduction kits and cash. Delivery of these
- 9 -
<PAGE>
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 24 additional DC10s along with additional aircraft engines and
equipment.
During the three-month period ended August 31, 1999, FedEx acquired three
A300s and one MD11 under operating leases. These aircraft were included as
purchase commitments as of May 31, 1999. 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, 1999 for the three A300s and one
MD11 are as follows (in thousands):
<TABLE>
<S> <C>
2000 $ 13,800
2001 21,800
2002 21,700
2003 22,100
2004 23,700
Thereafter 490,100
</TABLE>
(6) LEGAL PROCEEDINGS
There are two separate class-action lawsuits against FedEx generally
alleging that FedEx has breached its contract with the plaintiffs in
transporting packages shipped by them. These lawsuits allege that FedEx
continued to collect a 6.25% federal excise tax on the transportation of
property shipped by air after the excise tax expired on December 31, 1995,
until it was reinstated in August of 1996. The plaintiffs seek certification
as a class action, damages, an injunction to enjoin FedEx from continuing to
collect the excise tax referred to above, and an award of attorneys' fees and
costs. One case was filed in Circuit Court of Greene County, Alabama. On
October 6, 1999, the Greene County Circuit Court dismissed all claims against
FedEx by entering summary judgment. The plaintiffs have 42 days from the date
of this judgment to appeal to the Alabama Supreme Court.
The other case, which was filed in the Supreme Court of New York, New
York County, and contained allegations and requests for relief substantially
similar to the Alabama case, was dismissed with prejudice on FedEx's motion
on October 7, 1997. The court found that there was no breach of contract and
that the other causes of action were preempted by federal law. The plaintiffs
appealed the dismissal. This case originally alleged that FedEx continued to
collect the excise tax on the transportation of property shipped by air after
the tax expired on December 31, 1996. The New York complaint was later
amended to cover the first expiration period of the tax (December 31, 1995
through August 27, 1996) covered in the original Alabama complaint. The
dismissal was affirmed by the appellate court on March 2, 1999. The
plaintiffs have until October 18, 1999 to seek permission to appeal to the
highest New York appellate court. If the plaintiffs either fail to seek
appeal before October 18, 1999 or if the court refuses permission to appeal
as of such date, the dismissal of this case will become final.
The air transportation excise tax expired on December 31, 1995, was
reenacted by Congress effective August 27, 1996, and expired again on December
31, 1996. The excise tax was then reenacted by Congress effective March 7, 1997.
The expiration of the tax relieved FedEx of its obligation to pay the tax during
the periods of expiration. The Taxpayer Relief Act of 1997, signed by President
Clinton in August 1997, extended the tax for ten years through September 30,
2007.
FedEx intends to vigorously defend itself in these cases. No amount has
been reserved for this contingency.
- 10 -
<PAGE>
The Company and its subsidiaries are subject to other legal proceedings
and claims that arise in the ordinary course of their business. In the opinion
of management, the aggregate liability, if any, with respect to these other
actions will not materially adversely affect the financial position or results
of operations of the Company.
(7) SUBSEQUENT EVENTS
On September 10, 1999, the Company's FDX Logistics subsidiary acquired
the assets of GeoLogistics Air Services, Inc., an airfreight forwarder servicing
freight shipments between the United States and Puerto Rico, for approximately
$116,000,000 in cash. The acquired business will operate under the name
Caribbean Transportation Services, Inc.
On September 27, 1999, the Company's Board of Directors approved a
plan that authorizes the purchase of up to 15,000,000, or approximately 5%,
of the Company's outstanding shares of common stock. Through October 13,
1999, the Company had acquired 8,856,500 shares under the plan at an average
cost of $40.56 per share. The purchased shares will be held in treasury and
used for general corporate purposes.
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<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, 1999, and the related condensed consolidated statements of income and cash
flows for the three-month periods ended August 31, 1999 and 1998, included
herein, as indicated in their report thereon included on page 13.
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<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, 1999 and the related condensed
consolidated statements of income and cash flows for the three-month periods
ended August 31, 1999 and 1998. 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 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, 1999 and the related consolidated statements of
income, changes in stockholders' investment and comprehensive income and cash
flows for the year then ended. In our report dated June 29, 1999, 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, 1999, is fairly stated in all
material respects in relation to the consolidated balance sheet from which it
has been derived.
/s/ Arthur Andersen LLP
Memphis, Tennessee
September 15, 1999
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Consolidated results
Current quarter results reflect higher fuel prices and lower than
expected volume growth in the U.S. domestic markets at both of the Company's
principal business segments. Increased fuel costs negatively affected first
quarter operating income by $27 million compared to the prior year. Strong
package volume growth in certain international markets contributed positively
to the quarter's earnings.
Net interest expense declined from the prior year, primarily due to
lower debt levels. The effective tax rate for the first quarter was 39.5%
compared to 41.5% in the prior year, reflecting stronger results from
international operations.
Higher fuel costs and recent trends in domestic and international
package volume growth are expected to continue for the remainder of 2000. If
fuel costs continue at projected levels, operating income for the year could
be negatively impacted by more than $150 million compared to the prior year.
Stronger cost controls to restrain short-term spending combined with
productivity enhancements have been implemented in light of lower volume
growth. Certain capital spending projects are being delayed; however, the
Company plans to continue to make strategic capital investments in support of
its long-term growth goals.
Actual results for the remainder of 2000 may vary depending upon many
factors such as economic growth rates, rates of volume growth in the U.S.
domestic markets at both of the Company's principal business segments, the
actions of competitors, the spot price of aviation and diesel fuel (which has
continued to increase in the early part of the Company's second quarter), the
extent to which the Company enters into contracts designed to limit its
exposure to fluctuations in jet fuel prices, and the amount and timing of
temporary fuel surcharges or other pricing actions.
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<PAGE>
FEDERAL EXPRESS CORPORATION
The following table compares revenues and operating income (in millions)
and selected statistics (in thousands, except yield amounts) for the three
months ended August 31:
<TABLE>
<CAPTION>
PERCENT
1999 1998 CHANGE
-------- ------- --------
<S> <C> <C> <C>
Revenues:
Package:
U.S. overnight $1,832 $1,779 + 3
U.S. deferred 559 544 + 3
International Priority (IP) 819 725 +13
------ ------
Total package revenue 3,210 3,048 + 5
Freight:
U.S. 130 100 +30
International 127 134 - 5
------ ------
Total freight revenue 257 234 +10
Other 120 135 -12
------ ------
Total revenues $3,587 $3,417 + 5
------ ------
------ ------
Operating income $ 209 $ 219 - 5
------ ------
------ ------
Package statistics:
Average daily packages:
U.S. overnight 1,953 1,880 + 4
U.S. deferred 839 835 + 1
IP 297 265 +12
------ ------
Composite 3,089 2,980 + 4
Revenue per package (yield):
U.S. overnight $ 14.44 $ 14.33 + 1
U.S. deferred 10.25 9.88 + 4
IP 42.42 41.45 + 2
Composite 15.99 15.50 + 3
Freight statistics:
Average daily pounds:
U.S. 4,555 3,930 +16
International 2,505 2,620 - 4
------ ------
Composite 7,060 6,550 + 8
Revenue per pound (yield):
U.S. $ .44 $ .39 +13
International .78 .77 + 1
Composite .56 .54 + 4
</TABLE>
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<PAGE>
Revenues
FedEx package revenue increased as the Company experienced increases in
both package volume and revenue per package (yield) in the current quarter. The
most significant increase in revenues was in the higher-yielding IP services,
which experienced significant growth, particularly in Asia, and an improved
growth rate in U.S. outbound shipments. U.S. deferred package volume was
consistent with prior year first quarter levels, due, in part, to management
actions to restrict growth of these lower-yielding services. List price
increases, including an average 2.8% domestic rate increase in March 1999, and
other yield management actions also contributed to the higher yields in the
current quarter. Management expects these trends in package volume and yield to
continue throughout 2000. Actual results, however, may vary depending on a
number of factors, including the impact of competitive pricing changes, customer
responses to yield-management initiatives, changing customer demand patterns,
actions by FedEx's competitors, regulatory conditions for aviation rights and
economic conditions.
Total freight revenue also increased in the current quarter, due to
higher average daily pounds and yields in the U. S. freight market.
International freight revenue continued to decline in line with management's
expectations.
Other revenue included sales of engine noise reduction kits, charter
services, Canadian domestic revenue, logistics services and other.
Operating Income
Operating income declined due to higher fuel costs and lower than
expected growth in U.S. package services. Aircraft fuel expenses increased 26%
over the prior year quarter. Average cost per gallon increased 20% and gallons
consumed increased 5%. From time to time, the Company may enter into contracts
designed to limit its exposure to fuel price fluctuations, the timing and
magnitude of which may vary due to availability and pricing of such contracts.
No such contracts were in place in either the current or prior year's first
quarter. If the current trends continue, the Company may also take other actions
related to fuel costs, including, but not limited to, implementing temporary
fuel surcharges or other pricing actions.
Rentals and landing fees increased due to an increase in aircraft and
facilities leases entered into due to planned volume growth. Aircraft lease
expense rose 15% over the prior year quarter. As of August 31, 1999, the Company
had 100 wide-bodied aircraft under operating lease compared with 89 as of August
31, 1998. Management expects year-over-year increases in lease expense to
continue if the Company enters into additional aircraft rental agreements during
2000 and thereafter.
Maintenance and repairs increased 4% in the first quarter compared to the
prior year period. Given FedEx's increasing fleet size, aging fleet and variety
of aircraft types, management believes that maintenance and repairs expense for
the remainder of 2000 will increase at a rate higher than that experienced in
the first quarter. In part, this higher expense will likely be attributed to
scheduled maintenance and repairs expense and a greater number of routine cycle
checks resulting from fleet usage and certain Federal Aviation Administration
directives.
Salaries and employee benefits increased only 4% in the first quarter as
higher costs in connection with the agreement with the Fedex Pilots Association
were offset by improved productivity and lower provisions for variable
compensation.
Contributions from the sales of engine noise reduction kits declined $14
million year over year. Management expects similar declines for each of the
remaining quarters of the year.
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<PAGE>
RPS, INC.
The following table compares revenues and operating income (in millions)
and selected package statistics (in thousands, except yield amounts) for the
three months ended August 31:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
PERCENT
1999 1998 CHANGE
------- ------ --------
<S> <C> <C> <C>
Revenues $476 $441 + 8
- -------------------------------------------------------------------------
Operating income $ 51 $ 49 + 4
- -------------------------------------------------------------------------
Average daily packages 1,365 1,311 + 4
Revenue per package (yield) $ 5.53 $ 5.25 + 5
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
</TABLE>
Revenues
RPS revenues grew 8% reflecting solid yield increases and higher average
daily packages. Package growth was below management expectations. Yields were
positively impacted by a rate increase of 2.3% in February 1999 and a shift to
higher yielding packages.
RPS continues to focus on volume growth and expanding capacity, while
continuing to focus on yield management. RPS recently opened two additional hub
facilities, and will continue to expand package processing capacity to meet
growth needs. Actual results will depend on the impact of competitive pricing
changes, customer responses to yield-management initiatives and changing
customer demand patterns.
Operating Income
Operating income for the first quarter of 2000 increased only 4% on
revenue increases of 8%, primarily due to costs associated with continued
expansion. Depreciation expense increased 18% in the first quarter over the
prior year.
In the first quarter of 2000, RPS began testing new delivery services to
residential areas. First quarter costs associated with this test have been
minimal, but will begin to accelerate in later quarters as the test progresses.
If the test results remain favorable, the new services could be implemented by
the spring of calendar 2000 and there will be additional start-up and capital
costs associated with the implementation.
OTHER OPERATIONS
Other operations include Viking Freight, Inc. ("Viking"), a regional
less than truckload freight carrier operating in the western United States;
Roberts Express, Inc. ("Roberts"), a critical shipment carrier; FDX
Logistics, Inc. ("Logistics"), a contract logistics provider; and certain
unallocated corporate items.
Revenue and operating income from other operations increased 15% and
50%, respectively, over the prior year. These increases are primarily due to
stronger performances at Roberts and Viking and improved results at Logistics.
- 17 -
<PAGE>
FINANCIAL CONDITION
Liquidity
Cash and cash equivalents totaled $380 million at August 31, 1999, of
which $116 million was used in an acquisition in September (see Note 7 of
Notes to Consolidated Condensed Financial Statements). Management believes
that cash flow from operations, the Company's commercial paper program, the
revolving bank credit facility and other borrowing arrangements will
adequately meet the Company's working capital and stock repurchase program
needs for the foreseeable future.
On September 27, 1999, the Company's Board of Directors approved a
plan that authorizes the purchase of up to 15 million, or approximately 5%,
of the Company's outstanding shares of common stock. Through October 13, 1999,
the Company had acquired 8,856,500 shares under the plan at an average cost
of $40.56 per share. The purchased shares will be held in treasury and used
for general corporate purposes.
Capital Resources
The Company's operations are capital intensive, characterized by
significant investments in aircraft, vehicles, computer and telecommunications
equipment, package handling facilities and sort equipment. The amount and timing
of capital additions depend on various factors including volume growth, domestic
and international economic conditions, new or enhanced services, geographical
expansion of services, competition, availability of satisfactory financing and
actions of regulatory authorities.
Capital expenditures for the first three months of 2000 totaled $358
million and included aircraft, aircraft modifications, vehicles and ground
support equipment, facilities and customer automation and computer equipment. In
comparison, 1999 expenditures included one MD11, aircraft modifications,
customer automation and computer equipment and vehicles and ground support
equipment. For information on the Company's purchase commitments, see Note 5 of
Notes to Consolidated Condensed Financial Statements.
Management believes that the capital resources available to the Company
provide flexibility to access the most efficient markets for financing its
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, 1999.
Euro Currency Conversion
On January 1, 1999, 11 of the 15 member countries of the European Union
fixed conversion rates between their existing sovereign currencies ("legacy
currencies") and a single currency called the euro. On January 4, 1999, the euro
began trading on currency exchanges and became available for non-cash
transactions. The legacy currencies will remain legal tender through December
31, 2001. Beginning January 1, 2002, euro-denominated bills and coins will be
introduced, and by July 1, 2002, legacy currencies will no longer be legal
tender.
The Company established euro task forces to develop and implement euro
conversion plans. The work of the task forces in preparing for the introduction
of the euro and the phasing out of the various legacy currencies includes
numerous facets such as converting information technology systems, adapting
billing and payment systems and modifying processes for preparing financial
reports and records.
- 18 -
<PAGE>
Since January 1, 1999, the Company's subsidiaries have been prepared to
quote rates to customers, generate billings and accept payments, in both euro
and legacy currencies. Based on the work of the Company's euro task forces to
date, the Company believes that the introduction of the euro, any price
transparency brought about by its introduction and the phasing out of the legacy
currencies will not have a material impact on the Company's consolidated
financial position, results of operations or cash flows. Costs associated with
the euro project are being expensed as incurred and are being funded entirely by
internal cash flows.
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 approximately two 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. The Company has also engaged a major international
consulting firm to assist its subsidiaries in their Y2K program 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.
State of Readiness
Generally, the Company believes that its Y2K compliance effort is
substantially on schedule.
IT Systems
FedEx's compliance effort for all business-critical infrastructure and
applications software (collectively, "IT Systems") is substantially complete.
FedEx has inventoried all IT Systems. Assessment/design (researching the
compliance status and determining the impact of, and renovation requirements
for, the IT Systems), renovation (making IT Systems compliant), testing
(validating compliance), certification (independent internal verification that
appropriate testing process has occurred) of application software, and
certification of operating system software and program product software
(collectively, "infrastructure") are all substantially complete. Contingency
plans will be in place to help mitigate any negative impact of applications,
particularly those systems that are dependant on governmental or vendor
interfaces, that are ultimately determined to be non-compliant.
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 at the Company's other operating subsidiaries are
underway, and are targeted for completion by November 1, 1999.
Non-IT Systems
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") is substantially
complete.
The inventory and assessment phases relating to the Non-IT Systems of the
Company's other operating subsidiaries are substantially complete. The remaining
phases at the Company's other operating subsidiaries relating to Non-IT Systems
are underway, and are targeted for completion by November 1, 1999.
- 19 -
<PAGE>
FedEx has established several definitions for compliance related to
Non-IT Systems. For air infrastructure components (such as airports and air
traffic systems), FedEx defines compliant to mean that these components are
being aggressively assessed and that approved processes are in place to monitor
their evolving status and develop specific operational contingency plans. For
business critical suppliers and affiliates, FedEx defines compliant to mean that
the suppliers and affiliates have been assessed, and a contingency plan has been
developed as necessary.
For the automated shipping solutions offered to customers, FedEx defines
compliant to mean that FedEx has made available a compliant version of the
associated shipping solution. A customer may choose to remain on a non-compliant
version of software if the customer is willing to assume the associated risks
and there are no potentially unfavorable impacts on FedEx's internal systems.
The implementation of Y2K-compliant automated shipping solutions by customers,
particularly where development is required by the customer, will likely continue
through December 31, 1999 and beyond. FedEx will continue to test the
combinations of features, functionality and methods of use contained in its
shipping solutions through December 31, 1999 and will make changes as required.
For electronic interfaces with customers and suppliers, FedEx defines
compliant to mean that it has made compliant transaction sets available and has
made systems modifications that enable FedEx to translate non-compliant versions
that mitigate the potential impact to FedEx's internal systems.
Y2K Interfaces with Third Parties
The Company's operating subsidiaries are 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, customers, independent contractors,
vendors and suppliers) whose Y2K standing 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. All of the Company's
operating subsidiaries are actively encouraging Y2K compliance on the part of
third parties and are 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 has
developed contingency plans to minimize the impact of Y2K issues on its air
operations. Contingency plans will be implemented, as necessary, to mitigate the
impact of Y2K problems that might arise during the transition into 2000.
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 and/or vendor/product replacement. The Company's
other operating subsidiaries are developing a supply chain dependency model to
assess the risk levels associated with the Y2K non-compliance of material third
parties.
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
- 20 -
<PAGE>
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 for future date accuracy is being verified and
documented. FedEx uses an independent, internal process to verify that the
appropriate testing process has occurred.
A separate homogenous Y2K mainframe environment has been created to test
operating system software and program products software. The Y2K mainframe
environment is designed to accomplish future date "end to end" testing of the
larger applications and to validate interface communications between
applications.
Costs to Address Y2K Compliance
Since 1996, the Company has incurred approximately $101 million on Y2K
compliance ($8 million in the first quarter of 2000), which includes internal
and external software/hardware analysis, repair, vendor and supplier
assessments, risk mitigation planning, and related costs. The Company continues
to monitor its total expected costs associated with Y2K compliance efforts, and
currently expects that it will incur additional total costs of approximately $24
million, including depreciation of $9 million. Remaining Y2K expenditures will
include project management of the corporate contingency effort and the command
and control center, further system audit and validation, and project management
to ensure compliance of new systems development. The Company classifies costs as
Y2K for reporting purposes if they remedy only Y2K risks or result in the
formulation of contingency plans and would otherwise be unnecessary in the
normal course of business.
The Company's Y2K compliance effort is being funded entirely by internal
cash flows. For the fiscal year ending May 31, 2000, Y2K expenditures are
expected to be less than 10% of the Company's total IT expense budget. Although
there are opportunity costs to the Company's Y2K compliance effort, management
believes that no significant information technology projects have been deferred
due to this work.
Contingency Planning and Risks
FedEx's key contingency plans were completed by January 31, 1999. These
plans address the activities to be performed in preparation for and during a
Y2K-related failure that could have an immediate and significant impact on
normal operations. A Y2K-related failure could include, but is not limited to,
power outages, system or equipment failures, erroneous data, loss of
communications and failure of a supplier or vendor. The contingency plans
include, among other things, items such as pre-arranging alternative operating
locations, replacing non-Y2K compliant suppliers and vendors, using back-up
systems equipment and stockpiling additional inventory and supplies. They also
outline alternative procedures, including manual ones, that can be performed in
order to carry out mission-critical functions and trouble-shooting procedures
the IT organization can follow to bring internal systems and equipment back into
operation after a Y2K-related failure. The plans also establish procedures for
company-wide communications. These are in addition to the Company's operational
contingency plans for the pick-up, delivery and movement of packages. FedEx has
created a Y2K contingency command and control center that will link to its other
operations command and control centers. Key personnel will be on call beginning
November 1999 and on site by December 31, 1999.
Other contingency plans, including those covering vendor and supplier
issues are substantially complete. These plans are in place to minimize
Y2K-related risks that a vendor and supplier might pose if they are behind in
their own Y2K efforts. Testing activities, including structured walk-throughs,
mock drills and simulations are underway and are planned for completion by
October 31, 1999. The
- 21 -
<PAGE>
Company's other operating subsidiaries have substantially completed their
business-critical Y2K contingency plans and are currently formulating other
contingency plans for non-business-critical Y2K compliance issues. Although the
cost of developing contingency plans is included in the total project costs
described above, the cost of implementing any necessary contingency plans is not
known at this time.
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 and third-party suppliers, vendors and
customers with whom the Company deals, the Company believes that there is no
single most reasonably likely worst case scenario. However, the Company
believes that a most reasonably likely worst case scenario could include, but
is not limited to, the following situations: delivery delays and the related
re-routing costs due to the lack of readiness of airports and air traffic
systems, principally outside the United States; the inability to serve
certain customers or geographic areas due to their lack of compliance or lack
of readiness of customs bureaus in various countries and business continuance
capabilities of suppliers, vendors, customers and independent contractors,
including third party pick-up and delivery providers on whom the Company
relies in some international locations; and service delays or failures due to
the global utilities and telecommunications infrastructure. The Company's Y2K
program, including related contingency planning, is designed to substantially
lessen the possibility of significant interruptions of normal operations.
Despite its efforts to date, the Company may still incur substantial
expenditures or experience significant delays in delivering its services as
Y2K problems, both domestic and international, become known. Non-compliant
systems of vendors, suppliers, customers and other third parties could also
adversely affect the Company. 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 THAT
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.
- 22 -
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Note 6 Legal Proceedings in Part I is hereby incorporated by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the 1999 Annual Meeting of Stockholders held on September 27, 1999,
the Company's stockholders elected the Class I Directors to serve for a
three-year term expiring at the 2002 Annual Meeting. The tabulation of votes
with respect to each nominee for office was:
<TABLE>
<CAPTION>
NOMINEE FOR WITHHELD
------------------------------- ----------------- -------------------
<S> <C> <C>
Robert H. Allen 261,027,589 1,943,071
James L. Barksdale 261,060,146 1,910,514
Robert L. Cox 259,694,775 3,275,885
Paul S. Walsh 261,066,403 1,904,257
Peter S. Willmott 261,090,524 1,880,136
</TABLE>
An amendment to the Company's Amended and Restated Certificate of
Incorporation to increase the authorized common stock from 400,000,000 shares
to 800,000,000 shares was also approved by the stockholders by a vote of
237,295,315 to 24,731,132 with 944,213 abstentions.
The stockholders also approved the adoption of the the Company's 1999
Stock Incentive Plan by a vote of 254,719,309 to 6,935,614 with 1,315,737
abstentions. Under the 1999 Stock Incentive Plan, options for up to ten
million shares of common stock may be issued to key employees of the Company
and its subsidiaries. The Board of Directors' designation of Arthur Andersen
LLP as independent auditors for the fiscal year ending May 31, 2000 was
ratified by the stockholders by a vote of 261,688,746 to 532,357 with 749,557
abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
-------- -----------------------
<S> <C>
12.1 Computation of Ratio of Earnings to Fixed Charges.
15.1 Letter re Unaudited Interim Financial Statements.
27 Financial Data Schedule (electronic filing only).
</TABLE>
(b) Reports on Form 8-K.
No Current Reports on Form 8-K were filed during the quarter ended
August 31, 1999.
-23-
<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, 1999 /s/ JAMES S. HUDSON
---------------------------------------
JAMES S. HUDSON
CORPORATE VICE PRESIDENT
STRATEGIC FINANCIAL PLANNING & CONTROL
(PRINCIPAL ACCOUNTING OFFICER)
-24-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------- ----------------------
<S> <C>
12.1 Computation of Ratio of Earnings to Fixed Charges.
15.1 Letter re Unaudited Interim Financial Statements.
27 Financial Data Schedule (electronic filing only).
</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,
--------------------------------------------------------------------- ---------------------
1995 1996 1997 1998 1999 1998 1999
-------- ---------- ---------- ---------- ---------- -------- ---------
(In thousands, except ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income before income taxes.... $ 693,564 $ 702,094 $425,865 $ 899,518 $1,061,064 $255,348 $262,880
Add back:
Interest expense, net of
capitalized interest...... 130,923 109,249 110,080 135,696 110,590 27,380 24,311
Amortization of debt
issuance costs............ 2,493 1,628 1,328 1,481 9,249 219 282
Portion of rent expense
representative of
interest factor........... 333,971 393,775 439,729 508,325 570,789 136,883 170,346
---------- ---------- -------- --------- ---------- -------- --------
Earnings as adjusted.......... $1,160,951 $1,206,746 $977,002 $1,545,020 $1,751,692 $419,830 $457,819
---------- ---------- -------- --------- ---------- -------- --------
---------- ---------- -------- --------- ---------- -------- --------
Fixed Charges:
Interest expense, net of
capitalized interest........ $ 130,923 $ 109,249 $110,080 $ 135,696 $ 110,590 $ 27,380 $ 24,311
Capitalized interest.......... 27,381 44,654 45,717 33,009 38,880 11,384 8,537
Amortization of debt
issuance costs.............. 2,493 1,628 1,328 1,481 9,249 219 282
Portion of rent expense
representative of
interest factor............. 333,971 393,775 439,729 508,325 570,789 136,883 170,346
---------- ---------- -------- --------- ---------- -------- --------
$ 494,768 $ 549,306 $596,854 $ 678,511 $ 729,508 $175,866 $203,476
---------- ---------- -------- --------- ---------- -------- --------
---------- ---------- -------- --------- ---------- -------- --------
Ratio of Earnings to
Fixed Charges............... 2.3 2.2 1.6 2.3 2.4 2.4 2.2
========== ========== ======== ========= ========== ======== ========
</TABLE>
<PAGE>
EXHIBIT 15.1
September 15, 1999
FDX Corporation
942 South Shady Grove Road
Memphis, Tennessee 38120
We are aware that FDX Corporation will be incorporating by reference in its
previously filed Registration Statements No. 333-45037, 333-71065, and 333-74701
its Report on Form 10-Q for the quarter ended August 31, 1999, which includes
our report dated September 15, 1999 covering the unaudited interim financial
information contained therein. Pursuant to Regulation C of the Securities Act of
1933, that report is not considered part of these registration statements
prepared or certified by our firm or a report prepared or certified by our firm
within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
/s/ Arthur Andersen LLP
<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, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-START> JUN-01-1999
<PERIOD-END> AUG-31-1999
<CASH> 379,723
<SECURITIES> 0
<RECEIVABLES> 2,222,687
<ALLOWANCES> 78,163
<INVENTORY> 277,252
<CURRENT-ASSETS> 3,153,049
<PP&E> 14,091,367
<DEPRECIATION> 7,402,988
<TOTAL-ASSETS> 10,795,711
<CURRENT-LIABILITIES> 2,677,967
<BONDS> 0
0
0
<COMMON> 29,836
<OTHER-SE> 4,789,090
<TOTAL-LIABILITY-AND-EQUITY> 10,795,711
<SALES> 0
<TOTAL-REVENUES> 4,319,977
<CGS> 0
<TOTAL-COSTS> 4,036,170
<OTHER-EXPENSES> 319
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,608
<INCOME-PRETAX> 262,880
<INCOME-TAX> 103,846
<INCOME-CONTINUING> 159,034
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 159,034
<EPS-BASIC> .53
<EPS-DILUTED> .52
</TABLE>
