<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, 1995, OR
/ /TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO .
------------- -----------
COMMISSION FILE NUMBER: 1-7806
FEDERAL EXPRESS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 71-0427007
(State of incorporation) (I.R.S. Employer
Identification No.)
2005 Corporate Avenue
Memphis, Tennessee 38132
(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 29, 1995
Common Stock, par value $.10 per share 56,495,220
<PAGE>
FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
PAGE
Condensed Consolidated Balance Sheets
August 31, 1995 and May 31, 1995..................................... 3-4
Condensed Consolidated Statements of Income
Three Months Ended August 31, 1995 and 1994.......................... 5
Condensed Consolidated Statements of Cash Flows
Three Months Ended August 31, 1995 and 1994.......................... 6
Notes to Condensed Consolidated Financial Statements................... 7-9
Review of Condensed Consolidated Financial Statements
by Independent Public Accountants.................................... 10
Report of Independent Public Accountants............................... 11
Management's Discussion and Analysis of Results of Operations
and Financial Condition.............................................. 12-15
PART II. OTHER INFORMATION
Submission of Matters to Vote of Security Holders...................... 16
Exhibits and Reports on Form 8-K....................................... 16
EXHIBIT INDEX.......................................................... E-1
- 2 -
<PAGE>
FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
- ------
<TABLE>
<CAPTION>
August 31,
1995 May 31,
(Unaudited) 1995
----------- -------
(In thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents......................... $ 206,756 $ 357,548
Receivables, less allowance for doubtful accounts
of $32,545,000 and $31,173,000.................. 1,192,968 1,130,254
Spare parts, supplies and fuel.................... 194,784 193,251
Deferred income taxes............................. 113,543 115,801
Prepaid expenses and other........................ 22,435 72,228
----------- -----------
Total current assets.......................... 1,730,486 1,869,082
----------- -----------
Property and Equipment, at Cost (Note 6)............ 7,975,557 7,697,711
Less accumulated depreciation and amortization.... 4,126,115 3,982,467
----------- -----------
Net property and equipment.................... 3,849,442 3,715,244
----------- -----------
Other Assets:
Goodwill.......................................... 392,879 397,272
Equipment deposits and other assets (Note 6)...... 520,926 451,774
----------- -----------
Total other assets............................ 913,805 849,046
----------- -----------
$ 6,493,733 $ 6,433,372
----------- -----------
----------- -----------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
- 3 -
<PAGE>
FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' INVESTMENT
- ----------------------------------------
<TABLE>
<CAPTION>
August 31,
1995 May 31,
(Unaudited) 1995
----------- -------
(In thousands)
<S> <C> <C>
Current Liabilities:
Current portion of long-term debt (Note 3)......... $ 256,544 $ 255,448
Accounts payable................................... 603,401 618,621
Accrued expenses (Note 2).......................... 877,148 904,466
----------- -----------
Total current liabilities...................... 1,737,093 1,778,535
----------- -----------
Long-Term Debt, Less Current Portion (Note 3)........ 1,318,743 1,324,711
----------- ------------
Deferred Income Taxes................................ 55,495 55,956
----------- ------------
Other Liabilities.................................... 1,057,134 1,028,601
----------- -----------
Commitments and Contingencies (Notes 6 and 7)
Common Stockholders' Investment (Note 5):
Common Stock, $.10 par value;
200,000,000 shares authorized; 56,296,048 and
56,174,180 shares issued......................... 5,630 5,617
Other.............................................. 2,319,638 2,239,952
----------- -----------
Total common stockholders' investment......... 2,325,268 2,245,569
----------- -----------
$ 6,493,733 $ 6,433,372
----------- -----------
----------- -----------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
- 4 -
<PAGE>
FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
August 31,
------------------------
1995 1994 --
----------- ---------
(In thousands, except
per share amounts)
<S> <C> <C>
Revenues.............................................. $ 2,453,394 $2,231,127 --
----------- ----------
Operating Expenses:
Salaries and employee benefits...................... 1,147,526 1,061,808
Rentals and landing fees............................ 223,207 188,630
Depreciation and amortization....................... 174,121 156,932
Fuel................................................ 126,376 117,357
Maintenance and repairs............................. 124,575 136,183
Other............................................... 508,359 427,232 --
----------- ----------
2,304,164 2,088,142 --
----------- ----------
Operating Income...................................... 149,230 142,985 --
----------- ----------
Other Income (Expense):
Interest, net....................................... (23,845) (32,987)
Other, net.......................................... 4,501 (2,731)
----------- ----------
(19,344) (35,718)
----------- ----------
Income Before Income Taxes............................ 129,886 107,267
Income Tax Provision.................................. 54,552 46,125
----------- ----------
Net Income............................................ $ 75,334 $ 61,142
----------- ----------
----------- ----------
Earnings per Share.................................... $ 1.33 $ 1.08
----------- ----------
----------- ----------
Common and Common Equivalent Shares (Note 5).......... 56,688 56,614
----------- ----------
----------- ----------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
- 5 -
<PAGE>
FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
August 31,
-----------------------
1995 1994
--------- ---------
(In thousands)
<S> <C> <C>
Net Cash Provided by Operating Activities........ $ 190,577 $ 237,652
---------- ---------
Investing Activities:
Purchases of property and equipment, including
deposits on aircraft of $40,523,000 and
$42,612,000.................................. (326,502) (243,780)
Proceeds from disposition of property
and equipment:
Reimbursements of A300 deposits............. 20,205 38,794
Other dispositions.......................... 20,777 12,698
Other, net..................................... (56,441) 27,269
---------- ---------
Net cash used in investing activities............ (341,961) (165,019)
--------- ---------
Financing Activities:
Principal payments on debt..................... (5,004) (51,415)
Other, net..................................... 5,596 1,688
-------- ---------
Net cash provided by (used in)
financing activities........................... 592 (49,727)
--------- ---------
Net increase (decrease) in cash
and cash equivalents........................... (150,792) 22,906
Cash and cash equivalents at beginning of period. 357,548 392,923
--------- ---------
Cash and cash equivalents at end of period....... $ 206,756 $ 415,829
--------- ---------
--------- ---------
Cash payments for:
Interest (net of capitalized interest)......... $ 5,398 $ 18,608
--------- ---------
--------- ---------
Income taxes................................... $ 3,263 $ 4,023
--------- ---------
--------- ---------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
- 6 -
<PAGE>
FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The interim financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information, the
instructions to Quarterly Reports on Form 10-Q and Rule 10-01 of Regulation S-X,
and should be read in conjunction with Federal Express Corporation's Annual
Report on Form 10-K for the year ended May 31, 1995. 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 Federal Express Corporation and
subsidiaries as of August 31, 1995, the consolidated results of their operations
for the three-month periods ended August 31, 1995 and 1994, and their
consolidated cash flows for the three-month periods ended August 31, 1995 and
1994. Operating results for the three-month period ended August 31, 1995 are
not necessarily indicative of the results that may be expected for the year
ending May 31, 1996.
Certain prior period amounts have been reclassified to conform to the
current presentation.
(2) ACCRUED EXPENSES
<TABLE>
<CAPTION>
August 31,
1995 May 31,
(Unaudited) 1995
----------- --------
(In thousands)
<S> <C> <C>
Compensated absences........................... $195,126 $192,785
Insurance...................................... 181,152 176,806
Taxes other than income taxes.................. 130,682 137,037
Salaries....................................... 103,517 100,024
Employee benefits.............................. 77,341 127,870
Interest....................................... 52,342 30,443
Aircraft overhaul.............................. 39,528 53,540
Other.......................................... 97,460 85,961
-------- --------
$877,148 $904,466
-------- --------
-------- --------
</TABLE>
- 7 -
<PAGE>
(3) LONG-TERM DEBT
<TABLE>
<CAPTION>
August 31,
1995 May 31,
(Unaudited) 1995
----------- ----------
(In thousands)
<S> <C> <C>
Unsecured notes payable, interest rates of
6.25% to 10.57%, due through 2013............. $1,182,531 $1,187,413
Unsecured sinking fund debentures, interest
rate of 9.63%, due through 2020............... 98,340 98,323
Capital lease obligations and tax exempt bonds,
due through 2017, interest rates of
6.75% to 8.30%................................ 255,100 255,100
Less bond reserve funds....................... 11,096 11,096
---------- ----------
244,004 244,004
Other debt, interest rates of 9.68% to 9.98%.... 50,412 50,419
---------- ----------
1,575,287 1,580,159
Less current portion........................ 256,544 255,448
---------- ----------
$1,318,743 $1,324,711
---------- ----------
---------- ----------
</TABLE>
The Company has a revolving credit agreement with domestic and foreign
banks that provides for a commitment of $1,000,000,000 through May 31, 2000, all
of which was available at August 31, 1995. Interest rates on borrowings under
this agreement 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.
(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, 1995, none of these shares had been
issued.
(5) COMMON STOCKHOLDERS' INVESTMENT
During the three-month period ended August 31, 1995, 121,868 shares of
common stock were issued under employee incentive plans at prices ranging from
$30.56 to $62.94 per share.
- 8 -
<PAGE>
(6) COMMITMENTS
As of August 31, 1995, the Company's purchase commitments for the remainder
of 1996 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>
1996 (remainder) $447,600 $133,900 $324,500 $906,000
1997 593,400 14,900 48,400 656,700
1998 484,500 15,300 33,600 533,400
1999 241,900 18,100 15,600 275,600
2000 124,200 9,900 - 134,100
</TABLE>
(1) Primarily aircraft modifications, rotables, and development and upgrade of
aircraft simulators.
(2) Primarily vehicles, facilities, computers and other equipment.
The Company is committed to purchase 15 Airbus A300, 15 Airbus A310, 12 MD-
11, one B-727-200 and 26 Cessna 208B aircraft to be delivered through 2000.
Deposits and progress payments of $300,057,000 have been made toward these
purchases. At August 31, 1995, the Company had options to purchase up to 40
additional Airbus A300 aircraft for delivery beginning in 1999. In addition,
the Company may be required to purchase seven MD-11 aircraft for delivery
beginning no later than 2000 under a put option agreement.
(7) LEGAL PROCEEDINGS
In August 1995, the Company reached an agreement with the IRS concerning an
excise tax dispute for the seven and one-half year period ended March 31, 1991.
Under the terms of the settlement, the Company will not owe any additional
federal excise tax for this period. The dispute involved a claim by the IRS
that the Company had underpaid federal excise tax by as much as $159 million.
This settlement agreement completes the IRS' audit of the Company's federal
excise tax return for the period covered by the settlement. The Company also
gave up its claim for a $70 million refund of excise tax for the same time
period.
The Company is subject to other legal proceedings and claims which arise in
the ordinary course of its 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.
- 9 -
<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,
1995, and the related condensed consolidated statements of income for the
three-month periods ended August 31, 1995 and 1994 and the condensed
consolidated statements of cash flows for the three-month periods ended August
31, 1995 and 1994, included herein, as indicated in their report thereon
included on page 11.
-10-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Federal Express Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of
Federal Express Corporation and subsidiaries as of August 31, 1995 and the
related condensed consolidated statements of income for the three-month periods
ended August 31, 1995 and 1994 and the condensed consolidated statements of cash
flows for the three-month periods ended August 31, 1995 and 1994. 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 Federal Express Corporation and
subsidiaries as of May 31, 1995 and the related consolidated statements of
income, changes in common stockholders' investment and cash flows for the year
then ended. In our report dated June 29, 1995, we expressed an unqualified
opinion on those financial statements, which are not presented herein. In our
opinion, the accompanying condensed consolidated balance sheet as of May 31,
1995 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 14, 1995
-11-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
For the three months ended August 31, 1995, the Company recorded net income
of $75 million ($1.33 per share) on revenues of $2.5 billion compared with net
income of $61 million ($1.08 per share) on revenues of $2.2 billion for the same
period in the prior year. Results improved, reflecting the Company's focus on
managing its resources to capture the greatest overall economic benefit in a
growing worldwide express market.
Revenues
The following table shows a comparison of revenues (in millions):
<TABLE>
<CAPTION>
Three Months Ended
August 31,
------------------ Percent
1995 1994 Change
---- ---- -------
<S> <C> <C> <C>
U.S. domestic express $1,736 $1,612 + 8
International Priority (IP) 470 380 +24
International Express Freight
(IXF) and Airport-to-Airport
(ATA) 144 142 + 1
Charter, Logistics services
and other 103 97 + 6
------ ------
$2,453 $2,231 +10
------ ------
------ ------
</TABLE>
The following table shows a comparison of selected express and airfreight
(IXF/ATA) statistics (in thousands, except dollar amounts):
<TABLE>
<CAPTION>
Three Months Ended
August 31,
------------------- Percent
1995 1994 Change
---- ---- -------
<S> <C> <C> <C>
U.S. domestic express:
Average daily packages 2,106 1,891 +11
Revenue per package $12.68 $13.12 - 3
IP:
Average daily packages 179 149 +20
Revenue per package $40.45 $39.34 + 3
IXF/ATA:
Average daily pounds 2,035 2,083 - 2
Revenue per pound $ 1.09 $ 1.05 + 4
</TABLE>
- 12 -
<PAGE>
The Company's U.S. domestic express services continue to be pressured by
the competitive, price-sensitive environment prevalent in the U.S. express
delivery market. To slow the rate of decline in the Company's revenue per
package (yield), management has been examining and, where applicable, realigning
the level of customer discount to be commensurate with customer shipping
profiles. The Company also increased the price for one of its deferred services
in June 1995. These and other actions limited the yield decline to 3% in the
first quarter of 1996 compared with quarterly year-over-year declines that
ranged from 5% to 6% in 1995. Management will continue to review and realign
customer discounts for the remainder of 1996.
The Company's IP service, supported by competitive advantages and
favorable economic conditions, recorded year-over-year growth in revenues,
volumes and yields. The Company's airfreight services experienced slight
growth in revenues and yields while average daily volumes declined. This
drop in airfreight volumes is attributable to volume declines in the
Company's ATA service. The space-confirmed aspect of IP and IXF services and
growth in IXF volumes (38% year-over-year) reduced the space available for
ATA airfreight. As a result, ATA average daily volumes decreased 27% over
the prior year. In September 1995, after a delay from the planned July
opening, the Company opened its Subic Bay hub in the Philippines. The
Company initiated intra-Asian overnight service using this hub and added a
new trans-Pacific flight. Management believes that this new facility will
contribute to the growth in IP revenues and volumes and expects the new
flight to attract incremental airfreight although not as soon as originally
anticipated, given the delayed opening.
Operating Expenses
Salaries and employee benefits increased 8% primarily due to volume-related
growth in the Company's U.S. domestic employment levels.
An 18% increase in Rentals and landing fees is primarily due to the leasing
of additional Airbus A300 and A310 aircraft. As of August 31, 1995, the Company
had 10 A300 and 13 A310 aircraft under operating lease. One year earlier, the
Company had only four A300 and two A310 aircraft under operating lease.
Management expects year-over-year increases in lease expense to continue as the
Company enters into additional aircraft rental agreements during 1996 and
thereafter. The Company 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 declined 9% year-over-year for the first
quarter of 1996. However, this is a temporary departure from a long-term trend
of generally increasing maintenance and repairs expense. Management does not
believe this decline is sustainable.
- 13 -
<PAGE>
The increase in Other operating expense is due primarily to year-over-year
volume growth. Transportation services by outside vendors, temporary manpower
and consulting fees comprise the most significant portion of these expenses.
Operating Income
The Company's consolidated operating income for the first three months
of 1996 increased 4% over the prior year. U.S. domestic operating income
rose 4% over the prior year to $125 million. This increase is attributable
to double-digit growth in volume, reduced yield decline and a 2% reduction in
cost per package. Additionally, sales of engine noise reduction kits
contributed an incremental $7 million to U.S. domestic operating income. The
U.S. domestic operating margin was 7.1% compared to 7.4% in the prior year.
The Company's international operating income for the first three months of
1996 increased 5% over the prior year to $24 million and represented an
operating margin of 3.5% compared to 3.8% in the prior year. The delayed
opening of the Subic Bay facility adversely impacted international operating
income largely because of expenses incurred despite the delay. A $5 million
decline in Charter revenues also negatively affected international operating
income.
Other Income and Expense
A decrease in net interest expense of 28% for the quarter was due to lower
debt levels. In addition, the level of capitalized interest was higher,
principally attributable to interest capitalized during the modification of
certain Airbus A310 aircraft from passenger-to-freighter configuration. As of
August 31, 1995, the Company had seven A310 aircraft undergoing modification and
none in the prior year's first quarter.
Other, net for the quarter ended August 31, 1995, includes gains on sales
of B-727 aircraft.
FINANCIAL CONDITION
Liquidity
Cash and cash equivalents totaled $207 million at August 31, 1995, and
decreased $151 million during the first three months of 1996. Cash provided
from operations was $191 million compared with $238 million for the same period
in the prior year. The Company currently has available a $1 billion revolving
bank 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 flows from operations and available cash under its
commercial paper program and revolving bank credit facility will adequately meet
its working capital needs for the foreseeable future.
- 14 -
<PAGE>
Capital Resources
The Company's operations are capital intensive, characterized by
significant investments in aircraft, vehicles, package handling facilities, sort
equipment, and computer and telecommunication equipment. The amount and timing
of capital additions are dependent on various factors including volume growth,
new or enhanced services, geographical expansion of services, competition and
availability of satisfactory financing.
Capital expenditures for the first three months of 1996 totaled $327
million and included two A310 aircraft, nine Cessna 208 aircraft, deposits on
future Airbus A300 aircraft, vehicles and ground support equipment, and customer
automation and computer equipment. In comparison, prior year expenditures
totaled $244 million and included deposits on future Airbus A300 aircraft,
vehicle and ground support equipment, and customer automation and computer
equipment. For information on the Company's purchase commitments, see Note 6 of
Notes to Condensed Consolidated Financial Statements.
Additional investing activities included the purchase of an all-cargo route
authority between the U.S. and China.
In August 1995, approximately $123 million of pass through certificates
were issued under a November 1994 shelf registration filed with the Securities
and Exchange Commission to refinance the debt portion of leveraged leases
related to two Airbus A300 aircraft. The pass through certificates are not
direct obligations of, or guaranteed by, the Company, but amounts payable by the
Company under the two leveraged leases are sufficient to pay the principal and
interest on the certificates. The Company has $342 million of certificates
remaining under this registration statement which may be used to partially
finance the purchase of aircraft, or to finance or refinance aircraft in
leveraged lease transactions.
The Company believes its available capital resources provide flexibility to
allow access to the most efficient capital markets with respect to any
particular aircraft acquisition and are adequate for its future capital needs.
These resources include backstop financing for 15 Airbus A300 aircraft, $342
million of equipment trust and pass through certificates, $210 million under an
interim loan facility, $100 million of unsecured notes available under a June
1992 shelf registration and the public and private debt markets for leveraged
lease financing.
- 15 -
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the 1995 Annual Meeting of Stockholders held on September 25, 1995, the
Company's stockholders elected the Class III Directors to serve for a three-year
term expiring at the 1998 Annual Meeting. The tabulation of votes with respect
to each nominee for office was:
<TABLE>
<CAPTION>
Nominee For Withheld
-------------------- ---------- --------
<S> <C> <C>
Howard H. Baker, Jr. 48,716,476 833,137
Judith L. Estrin 48,885,365 664,248
Philip Greer 49,235,832 313,781
J. R. Hyde, III 49,235,431 314,182
Frederick W. Smith 49,082,215 467,398
</TABLE>
The stockholders also approved the Company's 1995 Stock Incentive Plan by a
vote of 48,097,212 to 1,374,789 with 77,612 abstentions and broker non-votes,
and the Company's 1995 Restricted Stock Plan by a vote of 43,123,423 to
6,339,039 with 87,151 abstentions and broker non-votes. The stockholders also
approved the Board of Directors' designation of Arthur Andersen LLP as
independent auditors for the fiscal year ended May 31, 1996 by a vote of
49,469,842 to 39,723 with 40,048 abstentions and broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Description of Exhibit
------- ----------------------
11.1 Statement re Computation of Earnings Per Share.
12.1 Computation of Ratio of Earnings to Fixed Charges.
15.1 Letter re Unaudited Interim Financial Statements.
(b) Reports on Form 8-K.
During the quarter ended August 31, 1995, the Registrant filed two Current
Reports on Form 8-K. The first report was dated August 14, 1995 and filed under
Item 7, Financial Statements and Exhibits. The report contained a press release
dated August 14, 1995.
The second report was dated August 16, 1995 and filed under Item 7,
Financial Statements and Exhibits. The report contained documents relating to
the 1995 Pass Through Certificates, Series A1 and A2.
- 16 -
<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.
FEDERAL EXPRESS CORPORATION
(Registrant)
Date: October 12, 1995 /s/ JAMES S. HUDSON
----------------------------
JAMES S. HUDSON
VICE PRESIDENT & CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
- 17 -
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------- ----------------------
11.1 Statement re Computation of Earnings Per Share.
12.1 Computation of Ratio of Earnings to Fixed Charges.
15.1 Letter re Unaudited Interim Financial Statements.
E-1
<PAGE>
EXHIBIT 11.1
FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
Net income applicable to common and common equivalent shares and the
weighted average number of shares used in the calculation of earnings per share
for the three-month periods ended August 31, 1995 and 1994 were as follows (in
thousands, except per share amounts):
Three Months
Ended August 31,
----------------
1995 1994
---- ----
Net income applicable to common and
common equivalent shares......................... $ 75,334 $ 61,142
-------- --------
-------- --------
Average shares of common stock outstanding......... 56,207 55,905
Common Equivalent Shares:
Assumed exercise of outstanding
dilutive options............................... 2,911 2,849
Less shares repurchased from proceeds of
assumed exercise of options.................... (2,430) (2,140)
-------- --------
Average common and common equivalent shares........ 56,688 56,614
-------- --------
-------- --------
Earnings per share................................. $ 1.33 $ 1.08
-------- --------
-------- --------
The computation of the number of shares repurchased from the proceeds of
the assumed exercise of outstanding dilutive options is based upon the average
market price of the Company's common stock during the periods. Common
equivalent shares are excluded in periods in which their assumed exercise would
have an anti-dilutive effect.
Fully diluted earnings per share are substantially the same as earnings per
share.
<PAGE>
EXHIBIT 12.1
FEDERAL EXPRESS CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
Year Ended May 31, August 31,
-------------------------------------------------- ------------------
1991 1992 1993 1994 1995 1994 1995
-------- --------- -------- -------- -------- -------- ------
(In thousands, except ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income (loss) before income taxes.... $ 40,942 $(146,828) $203,576 $378,462 $522,084 $107,267 $129,886
Add back: Interest expense, net of
capitalized interest.... 196,982 176,321 168,762 152,170 130,923 37,150 27,297
Amortization of debt
issuance costs.......... 1,634 2,570 4,906 2,860 2,493 671 436
Portion of rent expense
representative of
interest factor......... 292,840 299,012 262,724 285,261 329,370 75,903 90,028
-------- --------- -------- -------- -------- -------- --------
Earnings as adjusted................. $532,398 $ 331,075 $639,968 $818,753 $984,870 $220,991 $247,647
-------- --------- -------- -------- -------- -------- --------
-------- --------- -------- -------- -------- -------- --------
Fixed Charges:
Interest expense, net of
capitalized interest............... $196,982 $ 176,321 $168,762 $152,170 $130,923 $ 37,150 $ 27,297
Capitalized interest................. 35,442 26,603 31,256 29,738 27,381 5,703 10,329
Amortization of debt issuance costs.. 1,634 2,570 4,906 2,860 2,493 671 436
Portion of rent expense
representative of interest factor.. 292,840 299,012 262,724 285,261 329,370 75,903 90,028
-------- --------- -------- -------- -------- -------- ------
$526,898 $ 504,506 $467,648 $470,029 $490,167 $119,427 $128,090
-------- --------- -------- -------- -------- -------- --------
-------- --------- -------- -------- -------- -------- --------
Ratio of Earnings to Fixed Charges. 1.0 (A) 1.4 1.7 2.0 1.9 1.9
-------- --------- -------- -------- -------- -------- --------
-------- --------- -------- -------- -------- -------- --------
</TABLE>
(A) Earnings were inadequate to cover fixed charges by $173.4 million for the
year ended May 31, 1992.
<PAGE>
[ARTHUR
ANDERSEN
LETTERHEAD]
EXHIBIT 15.1
September 14, 1995
Federal Express Corporation
2005 Corporate Avenue
Memphis, Tennessee 38132
We are aware that Federal Express Corporation will be incorporating by reference
in its previously filed Registration Statements No. 2-74000, 2-95720, 33-20138,
33-38041, 33-47176, 33-55055 and 33-56569 its Report on Form 10-Q for the
quarter ended August 31, 1995, which includes our report dated September 14,
1995 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,
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, 1995 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-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> AUG-31-1995
<CASH> 206,756
<SECURITIES> 0
<RECEIVABLES> 1,225,513
<ALLOWANCES> 32,545
<INVENTORY> 194,784
<CURRENT-ASSETS> 1,730,486
<PP&E> 7,975,557
<DEPRECIATION> 4,126,115
<TOTAL-ASSETS> 6,493,733
<CURRENT-LIABILITIES> 1,737,093
<BONDS> 1,318,743
<COMMON> 5,630
0
0
<OTHER-SE> 2,319,638
<TOTAL-LIABILITY-AND-EQUITY> 6,493,733
<SALES> 0
<TOTAL-REVENUES> 2,453,394
<CGS> 0
<TOTAL-COSTS> 2,304,164
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,845
<INCOME-PRETAX> 129,886
<INCOME-TAX> 54,552
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75,334
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 1.33
</TABLE>
