<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, 2000, 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 / /
The number of shares of common stock outstanding as of September 30, 2000 was
1,000. The Registrant is a wholly-owned subsidiary of FedEx Corporation, and
there is no market for the Registrant's common stock.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H(1)(a)
AND (b) OF FORM 10-Q AND IS FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT
PERMITTED BY GENERAL INSTRUCTION H(2).
<PAGE>
FEDERAL EXPRESS CORPORATION (FEDEX EXPRESS)
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
ITEM 1: Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets
August 31, 2000 and May 31, 2000................................................................... 3-4
Condensed Consolidated Statements of Income
Three Months Ended August 31, 2000
and August 31, 1999................................................................................ 5
Condensed Consolidated Statements of Cash Flows
Three Months Ended August 31, 2000
and August 31, 1999................................................................................ 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
ITEM 2: Management's Discussion and Analysis of Results of
Operations and Financial Condition................................................................. 12-14
ITEM 3: Quantitative and Qualitative Disclosures About Market Risk........................................ 14
PART II. OTHER INFORMATION
ITEM 6: Exhibits and Reports on Form 8-K.................................................................. 15
Signatures........................................................................................... 16
EXHIBIT INDEX........................................................................................ E-1
</TABLE>
-2-
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FEDERAL EXPRESS CORPORATION (FEDEX EXPRESS)
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
August 31,
2000 May 31,
(Unaudited) 2000
-------------- -----------
(In thousands)
Current Assets:
<S> <C> <C>
Cash and cash equivalents....................................................$ 99,696 $ 88,630
Receivables, less allowances of
$62,042,000 and $56,517,000................................................ 2,082,698 2,088,854
Spare parts, supplies and fuel............................................... 239,101 247,372
Deferred income taxes........................................................ 247,525 247,802
Prepaid expenses and other................................................... 39,493 69,139
----------- -----------
Total current assets..................................................... 2,708,513 2,741,797
Property and Equipment, at Cost................................................... 11,425,356 12,958,570
Less accumulated depreciation and amortization............................... 6,026,968 6,846,647
----------- -----------
Net property and equipment............................................... 5,398,388 6,111,923
Other Assets:
Goodwill..................................................................... 324,911 327,765
Due from parent.............................................................. 106,180 86,890
Other........................................................................ 518,708 472,164
----------- -----------
Total other assets....................................................... 949,799 886,819
----------- -----------
$ 9,056,700 $ 9,740,539
=========== ===========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
-3-
<PAGE>
FEDERAL EXPRESS CORPORATION (FEDEX EXPRESS)
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND OWNER'S EQUITY
<TABLE>
<CAPTION>
August 31,
2000 May 31,
(Unaudited) 2000
------------- ----------
(In thousands)
<S> <C> <C>
Current Liabilities:
Current portion of long-term debt............................................ $ 22,339 $ 6,339
Accrued salaries and employee benefits....................................... 543,474 636,375
Accounts payable............................................................. 857,648 956,929
Accrued expenses............................................................. 839,724 805,800
Due to parent company........................................................ 30,486 16,425
---------- ----------
Total current liabilities................................................ 2,293,671 2,421,868
Long-Term Debt, Less Current Portion.............................................. 1,038,491 1,054,430
Deferred Income Taxes............................................................. 135,623 240,569
Other Liabilities................................................................. 1,676,464 1,657,405
Commitments (Note 3)
Owner's Equity:
Common Stock, $.10 par value;
1,000 shares authorized, issued and outstanding............................ - -
Additional paid-in capital................................................... 297,689 894,718
Retained earnings ........................................................... 3,650,891 3,505,422
Accumulated other comprehensive income....................................... (36,129) (33,873)
---------- ----------
Total owner's equity..................................................... 3,912,451 4,366,267
---------- ----------
$9,056,700 $9,740,539
=========== ===========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
-4-
<PAGE>
FEDERAL EXPRESS CORPORATION (FEDEX EXPRESS)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
August 31,
-------------------------------
2000 1999
---------- ------------
(In thousands)
<S> <C> <C>
Revenues $3,915,681 $3,586,806
Operating Expenses:
Salaries and employee benefits............................................... 1,595,450 1,609,060
Purchased transportation..................................................... 150,360 131,352
Rentals and landing fees..................................................... 343,512 346,742
Depreciation and amortization................................................ 197,264 242,077
Fuel 240,589 180,821
Maintenance and repairs...................................................... 267,721 238,281
Intercompany charges (Note 5)................................................ 327,146 15,174
Other........................................................................ 535,911 614,356
---------- ----------
3,657,953 3,377,863
---------- ----------
Operating Income.................................................................. 257,728 208,943
Other Income (Expense):
Interest, net................................................................ (19,313) (19,024)
Other, net................................................................... (1,878) (1,149)
---------- ----------
(21,191) (20,173)
---------- ----------
Income Before Income Taxes........................................................ 236,537 188,770
Provision for Income Taxes........................................................ 91,067 74,564
---------- ----------
Net Income........................................................................$ 145,470 $ 114,206
========== ==========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
-5-
<PAGE>
FEDERAL EXPRESS CORPORATION (FEDEX EXPRESS)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
August 31,
---------------------------
2000 1999
---------- -------------
(In thousands)
<S> <C> <C>
Net Cash Provided by Operating Activities.........................................$ 227,348 $ 206,385
Investing Activities:
Purchases of property and equipment.......................................... (199,103) (307,240)
Proceeds from disposition of property
and equipment:
Reimbursements of A300 and MD11 deposits................................. - 22,377
Other dispositions....................................................... 2,937 82,567
Other, net................................................................... (826) 257
---------- -------------
Net cash used in investing activities............................................. (196,992) (202,039)
Financing Activities:
Principal payments on debt................................................... - (12,500)
Net (payments) receipts from parent company.................................. (19,290) 18,289
----------- -----------
Net cash (used in) provided by financing activities............................... (19,290) 5,789
----------- -----------
Net increase in cash and cash equivalents......................................... 11,066 10,135
Cash and cash equivalents at beginning of period.................................. 88,630 88,238
----------- -----------
Cash and cash equivalents at end of period........................................$ 99,696 $ 98,373
=========== ===========
Cash payments for:
Interest (net of capitalized interest).......................................$ 21,257 $ 18,199
=========== ===========
Income taxes.................................................................$ 108,968 $ 12,943
=========== ===========
Non-cash investing and financing activities:
Fair value of assets surrendered under
exchange agreements (with two airlines)....................................$ - $ 11,670
Fair value of assets acquired under
exchange agreements........................................................ 1,779 9,674
----------- -----------
Fair value of assets surrendered (under) over
fair value of assets acquired..............................................$ (1,779) $ 1,996
=========== ===========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
-6-
<PAGE>
FEDERAL EXPRESS CORPORATION (FEDEX EXPRESS)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These interim financial statements of Federal Express Corporation ("FedEx
Express" or the "Company") 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, 2000. 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, 2000
and the consolidated results of its operations and cash flows for the
three-month periods ended August 31, 2000 and August 31, 1999. Operating results
for the three-month period ended August 31, 2000 are not necessarily indicative
of the results that may be expected for the year ending May 31, 2001.
The Company is in a single line of business and operates in one business
segment - the worldwide express transportation and distribution of goods and
documents.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which was subsequently
amended by SFAS No. 137 and is now effective for fiscal years beginning after
June 15, 2000. The Statement requires an entity to recognize all derivatives
as either assets or liabilities in the balance sheet and to measure those
instruments at fair value. The impact, if any, on earnings, comprehensive
income and financial position of the adoption of SFAS No. 133 will depend on
the amount, timing and nature of any agreements entered into by the Company.
Management has not yet completed its estimate of the effect of the adoption
of this Statement.
FedEx Corporation, the Company's parent, has entered into contracts on
behalf of FedEx Express that are designed to limit its exposure to fluctuations
in jet fuel prices. Under these contracts, the Company's parent makes (or
receives) payments based on the difference between a fixed price and the market
price of jet fuel, as determined by an index of spot market prices representing
various geographic regions. The difference is recorded as an increase or
decrease in fuel expense. Under jet fuel hedging contracts, the Company will
receive $26,933,786 for the first quarter of 2001. As of August 31, 2000,
contracts in place to fix the price of jet fuel cover a total notional volume of
272,414,000 gallons through the second quarter of 2002. Based on current market
prices, the fair value of these jet fuel hedging contracts was an asset of
approximately $79,365,000 at August 31, 2000. As of September 26, 2000,
contracts in place to fix the price of jet fuel cover approximately 40% of the
expected jet fuel usage for 2001 and approximately 18% through the third quarter
of 2002.
Certain prior period amounts have been reclassified to conform to the
current presentation.
-7-
<PAGE>
(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,
----------------------
2000 1999
--------- ---------
(In thousands)
<S> <C> <C>
Net income................................................................... $145,470 $114,206
Other comprehensive income:
Foreign currency translation adjustments, net of
deferred tax benefit of $1,263,000 and deferred taxes of $154,000...... (2,257) 1,205
-------- --------
Comprehensive income..................................................... $143,213 $115,411
======== ========
</TABLE>
(3) COMMITMENTS
As of August 31, 2000, the Company's purchase commitments for the
remainder of 2001 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>
2001 (remainder) $207,700 $315,900 $198,800 $722,400
2002 235,100 429,500 6,200 670,800
2003 342,400 457,400 - 799,800
2004 271,200 417,800 - 689,000
2005 256,100 453,700 - 709,800
</TABLE>
(1) Primarily aircraft modifications, rotables, spare parts and spare engines.
(2) Primarily vehicles, facilities, computers and other equipment.
The Company is committed to purchase 11 DC10s, 28 MD11s and 75 Ayres ALM
200s to be delivered through 2007. Deposits and progress payments of $7,100,000
have been made toward these purchases.
The Company has entered into agreements with two airlines to acquire
53 DC10 aircraft (49 of which had been received as of August 31, 2000), spare
parts, aircraft engines and other equipment, and maintenance services, in
exchange for a combination of aircraft engine noise reduction kits and cash.
Delivery of these aircraft began in 1997 and will continue through 2001.
Additionally, these airlines may exercise put options through December 31,
2003, requiring FedEx Express to purchase up to 14 additional DC10s along
with additional aircraft engines and equipment.
-8-
<PAGE>
(4) RELATED PARTY TRANSACTIONS
The following table represents FedEx Express' related party balances
outstanding at August 31, 2000 and May 31, 2000 (in thousands). The long-term
amounts primarily represent the net activity from participation in FedEx
Corporation's consolidated cash management program.
<TABLE>
<CAPTION>
August 31, 2000 Other
Current Other Assets Current Due From/
Assets (Non-current) Liabilities (Due To)
----------------------------------------- ----------------
<S> <C> <C> <C> <C>
FedEx Corporation $ - $106,180 $(30,486) $ 75,694
Other Corporate
Subsidiaries 7,535 - (61,705) (54,170)
------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
May 31, 2000 Other
Current Other Assets Current Due From/
Assets (Non-Current) Liabilities (Due To)
------ ------------- ----------- -------------
<S> <C> <C> <C> <C>
FedEx Corporation $ - $ 86,890 $(16,425) $ 70,465
Other Corporate
Subsidiaries - - - -
------------------------------------------------------------------------------------------
</TABLE>
(5) INTERCOMPANY TRANSACTIONS
The formation of FedEx Corporate Services Inc. ("FedEx Services"), a
subsidiary of the Company's parent, FedEx Corporation, has changed the way
certain costs are captured and allocated between the various FedEx
Corporation operating segments. For example, salaries, wages and benefits,
depreciation and other costs for the sales, marketing and information
technology departments previously incurred at FedEx Express are now incurred
at FedEx Services and allocated to FedEx Corporation's operating segments
using various, relevant metrics and are included in the line item
"Intercompany charges". Consequently, certain expense data presented is not
comparable to prior periods. The Company's parent believes the total amounts
allocated to FedEx Express reasonably reflect the cost of providing such
services.
In addition, certain net assets owned by FedEx Express were
transferred to FedEx Corporation in connection with the formation of FedEx
Services.
-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, 2000, and the related condensed consolidated statements of income for the
three-month periods ended August 31, 2000 and August 31, 1999 and the condensed
consolidated statements of cash flows for the three-month periods ended August
31, 2000 and August 31, 1999, included herein, as indicated in their report
thereon included on page 11.
-10-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholder of Federal Express Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of
Federal Express Corporation (a Delaware corporation) and subsidiaries as of
August 31, 2000 and the related condensed consolidated statements of income and
cash flows for the three-month periods ended August 31, 2000 and 1999. 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 accounting principles generally accepted in the United States.
We have previously audited, in accordance with auditing standards
generally accepted in the United States, the consolidated balance sheet of
Federal Express Corporation as of May 31, 2000 and the related consolidated
statements of income, changes in owner's equity and comprehensive income and
cash flows for the year then ended. In our report dated June 27, 2000, 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, 2000 is fairly stated in all material respects in
relation to the consolidated balance sheet from which it has been derived.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Memphis, Tennessee
September 18, 2000
-11-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following table compares revenues and operating income (in millions)
and selected statistics (in thousands, except yield amounts) for the three-month
periods ended August 31:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Percent
2000 1999(1) Change
---- ------- --------
<S> <C> <C> <C>
Revenues:
Package:
U.S. overnight box(2) $1,479 $1,380 + 7
U.S. overnight envelope(3) 472 452 + 4
U.S. deferred 618 559 +11
International Priority (IP) 984 819 +20
------ ------
Total package revenue 3,553 3,210 +11
Freight:
U.S. 162 130 +25
International 115 127 - 9
------ ------
Total freight revenue 277 257 + 8
Other 86 120 -28
------ ------
Total revenues $3,916 $3,587 + 9
Operating Expenses:
Salaries and employee benefits 1,595
Purchased transportation 150
Rentals and landing fees 344
Depreciation and amortization 197
Fuel 241
Maintenance and repairs 268
Intercompany charges 327
Other 536
------
Total operating expenses 3,658 3,378 + 8
------ ------
Operating income $ 258 $ 209 +23
====== ======
------------------------------------------------------------------------------------------------
Package statistics:
Average daily packages:
U.S. overnight box 1,254 1,205 + 4
U.S. overnight envelope 758 748 + 1
U.S. deferred 876 839 + 4
IP 338 297 +14
------ ------
Total Packages 3,226 3,089 + 4
Revenue per package (yield):
U.S. overnight box $ 18.15 $ 17.62 + 3
U.S. overnight envelope 9.59 9.31 + 3
U.S. deferred 10.85 10.25 + 6
IP 44.80 42.42 + 6
Package Composite 16.95 15.99 + 6
Freight statistics:
Average daily pounds:
U.S. 4,369 4,555 - 4
International 2,312 2,505 - 8
------- -------
Total Freight 6,681 7,060 - 5
Revenue per pound (yield):
U.S. $ .57 $ .44 +30
International .76 .78 - 3
Freight Composite .64 .56 +14
</TABLE>
(1) Operating expense detail for the three month period ended August 31, 1999
has been omitted, as this data is not comparable to the three month
period ended August 31, 2000. See Note 5 to Condensed Consolidated
Financial Statements.
(2) The U.S. Overnight Box category includes packages exceeding 8 ounces in
weight.
(3) The U.S. Overnight Envelope category includes envelopes weighing 8 ounces or
less.
-12-
<PAGE>
Revenues
Total package revenue increased 11% year over year in the first quarter
of 2001, principally due to increases in IP and U.S. overnight box volumes and
yields. Average daily package volume growth rates for U.S. domestic overnight
box and U.S. domestic deferred services each increased more than 4% during the
quarter. We attribute this growth to, among other things, our parent
corporation's new sales and marketing strategies.
Total freight revenue for the first quarter of 2001 increased due to
significantly improved yields in U.S. freight, offset by anticipated declines in
domestic freight volume and international freight volume and yield.
Other revenue included Canadian domestic revenue, charter services,
logistics services, sales of hushkits and other. As expected, hushkit sales were
immaterial in the first quarter of 2001.
Operating Income
Operating income for the first quarter of 2001 increased 23% year over
year despite higher fuel costs. Improved yield, cost containment and
productivity enhancement programs contributed to the increased first quarter of
2001 operating margin, which combined with volume growth led to the strong
growth in operating income. Staffing levels in general and administrative
support functions were held flat, and discretionary spending was reduced. A 29%
increase in average jet fuel price per gallon contributed to a negative impact
of approximately $52 million on first quarter total fuel costs, including the
results of jet fuel hedging contracts entered into to mitigate some of the
increased jet fuel costs. Fuel surcharges implemented during 2000 offset the
increase in fuel costs in the quarter. Maintenance and repairs expense increased
year over year due to the timing of scheduled maintenance.
Year-over-year comparisons were also affected by the reduction in the
contribution from sales of hushkits. Operating profit from these sales was less
than $1 million in the first quarter of 2001, compared to $15 million in the
first quarter of the prior year.
Actual results for the remainder of the year may vary depending on, but
not limited to, the continued successful implementation of our parent
corporation's reorganization and rebranding initiative, the impact of
competitive pricing changes, customer responses to yield management initiatives,
the timing and extent of network refinement, actions by our competitors and jet
fuel prices.
FINANCIAL CONDITION
Liquidity
Cash and cash equivalents totaled $100 million at August 31, 2000,
compared to $89 million at May 31, 2000. Cash flows from operating activities
during first quarter of 2001 totaled $227 million, compared to $206 million for
the prior year period.
We believe that cash flow from operations and FedEx Corporation's
commercial paper program and revolving bank credit facility will adequately
provide for the Company's working capital needs for the foreseeable future.
Capital Resources
Our operations require 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.
-13-
<PAGE>
We have historically financed our capital investments through the use of
lease, debt and equity financing in addition to the use of internally generated
cash from operations. In June 2000, FedEx Express filed a shelf registration
with the Securities and Exchange Commission, indicating that we may issue up to
$450 million in pass-through certificates in one or more offerings to finance or
refinance leveraged operating aircraft leases. For information on the Company's
purchase commitments, see Note 3 of Notes to Condensed Consolidated Financial
Statements.
We believe that the capital resources available to us provide flexibility
to access the most efficient markets for financing capital acquisitions,
including aircraft, and are adequate for the Company's future capital needs.
Euro Currency Conversion
Since the beginning of the European Union's transition to the euro on
January 1, 1999, FedEx Express has been prepared to quote rates to customers,
generate billings and accept payments, in both euro and legacy currencies.
The legacy currencies will remain legal tender through December 31, 2001. We
believe 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 our 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.
* * *
CERTAIN STATEMENTS CONTAINED IN THIS REPORT ARE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995, SUCH AS STATEMENTS RELATING TO MANAGEMENT'S VIEWS WITH RESPECT
TO FUTURE EVENTS AND FINANCIAL PERFORMANCE. SUCH FORWARD-LOOKING STATEMENTS
ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM HISTORICAL EXPERIENCE OR FROM FUTURE
RESULTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. POTENTIAL
RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO, ECONOMIC AND
COMPETITIVE CONDITIONS IN THE MARKETS WHERE THE COMPANY OPERATES, CONTINUED
INCREASES IN FUEL COSTS AND THE ABILITY TO MITIGATE THE EFFECTS OF SUCH
INCREASES THROUGH FUEL SURCHARGES AND HEDGING ACTIVITIES, MATCHING CAPACITY
TO VOLUME LEVELS AND OTHER UNCERTAINTIES DETAILED FROM TIME TO TIME IN THE
SECURITIES AND EXCHANGE COMMISSION FILINGS OF THE COMPANY AND FEDEX
CORPORATION.
EXCEPT AS OTHERWISE INDICATED, REFERENCES TO YEARS MEANS THE COMPANY'S
FISCAL YEAR ENDING MAY 31, 2001 OR ENDED MAY 31 OF THE YEAR REFERENCED.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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, 2000. Foreign currency fluctuations during
the first quarter of 2001 did not have a material effect on the results of
operations for the period. Many of the Company's international sales
transactions are denominated in U.S. dollars, which mitigates the impact of
foreign currency fluctuations.
-14-
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
-------- -----------------------
<S> <C>
10.1 Extension Agreement dated as of October 2, 2000 to Credit
Agreement dated as of January 15, 1998 among FedEx
Corporation, certain Lenders named therein and Bank One, NA
(formerly known as The First National Bank of Chicago), in
its capacity as Agent (filed as Exhibit 10.1 to FedEx
Corporation's Quarterly Report on Form 10-Q for the quarter
ended August 31, 2000, and incorporated herein by
reference).
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, 2000.
-15-
<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
Date: October 9, 2000 /s/ MICHAEL W. HILLARD
------------------------------------------
MICHAEL W. HILLARD
VICE PRESIDENT & CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
-16-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
-------- ----------------------
<S> <C>
10.1 Extension Agreement dated as of October 2, 2000 to Credit
Agreement dated as of January 15, 1998 among FedEx Corporation,
certain Lenders named therein and Bank One, NA (formerly known
as The First National Bank of Chicago), in its capacity as
Agent (filed as Exhibit 10.1 to FedEx Corporation's Quarterly
Report on Form 10-Q for the quarter ended August 31, 2000, and
incorporated herein by reference).
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
