- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 NOVEMBER 30, 1998, OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________. COMMISSION FILE NUMBER: 333-39483 FDX CORPORATION (Exact name of registrant as specified in its charter) Delaware 62-1721435 (State of incorporation) (I.R.S. Employer Identification No.) 6075 Poplar Avenue, Suite 300 Memphis, Tennessee 38119 (Address of principal (Zip Code) executive offices) (901) 369-3600 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock Outstanding Shares at December 31, 1998 Common Stock, par value $.10 per share 147,963,830 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
FDX CORPORATION INDEX PART I. FINANCIAL INFORMATION <TABLE> <CAPTION> PAGE <S> <C> Condensed Consolidated Balance Sheets November 30, 1998 and May 31, 1998............................................. 3-4 Condensed Consolidated Statements of Income Three and Six Months Ended November 30, 1998 and 1997.......................... 5 Condensed Consolidated Statements of Cash Flows Six Months Ended November 30, 1998 and 1997.................................... 6 Notes to Condensed Consolidated Financial Statements................................ 7-11 Review of Condensed Consolidated Financial Statements by Independent Public Accountants.............................................. 12 Report of Independent Public Accountants............................................ 13 Management's Discussion and Analysis of Results of Operations and Financial Condition........................................................ 14-23 PART II. OTHER INFORMATION Legal Proceedings................................................................... 24 Exhibits and Reports on Form 8-K.................................................... 24 EXHIBIT INDEX....................................................................... E-1 </TABLE> - 2 -
FDX CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> ASSETS November 30, 1998 May 31, (Unaudited) 1998 ------------- --------- <S> <C> <C> (In thousands) Current Assets: Cash and cash equivalents................................... $ 664,443 $ 229,565 Receivables, less allowances of $67,374,000 and $61,409,000............................... 2,102,834 1,943,423 Spare parts, supplies and fuel.............................. 332,050 364,714 Deferred income taxes....................................... 256,731 232,790 Prepaid expenses and other.................................. 56,245 109,640 ----------- ----------- Total current assets.................................... 3,412,303 2,880,132 ----------- ----------- Property and Equipment, at Cost.................................. 13,198,930 12,463,874 Less accumulated depreciation and amortization.............. 6,927,917 6,528,824 ----------- ----------- Net property and equipment.............................. 6,271,013 5,935,050 ----------- ----------- Other Assets: Goodwill.................................................... 349,954 356,272 Equipment deposits and other assets......................... 520,636 514,606 ----------- ----------- Total other assets...................................... 870,590 870,878 ----------- ----------- $10,553,906 $ 9,686,060 =========== =========== </TABLE> See accompanying Notes to Condensed Consolidated Financial Statements. - 3 -
FDX CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' INVESTMENT <TABLE> <CAPTION> November 30, 1998 May 31, (Unaudited) 1998 -------------- ---------- <S> <C> <C> (In thousands) Current Liabilities: Short-term borrowings...................................... $ 422,512 $ - Current portion of long-term debt.......................... 114,087 257,529 Salaries, wages and benefits............................... 678,905 611,750 Accounts payable............................................. 1,099,123 1,145,410 Accrued expenses........................................... 890,939 789,150 ----------- ---------- Total current liabilities.............................. 3,205,566 2,803,839 ----------- ---------- Long-Term Debt, Less Current Portion............................ 1,362,013 1,385,180 Deferred Income Taxes........................................... 271,766 274,147 Other Liabilities............................................... 1,414,660 1,261,664 Commitments and Contingencies (Notes 7 and 8) Common Stockholders' Investment: Common Stock, $.10 par value; 400,000,000 shares authorized, 147,655,638 and 147,410,578 issued................................. 14,766 14,741 Additional paid-in capital................................. 998,979 992,821 Retained earnings ......................................... 3,331,513 2,999,354 Deferred compensation and other............................ (21,934) (18,409) Cumulative foreign currency translation adjustments.................................. (23,423) (27,277) ----------- ---------- Total common stockholders' investment.................. 4,299,901 3,961,230 ----------- ---------- $10,553,906 $9,686,060 =========== ========== </TABLE> See accompanying Notes to Condensed Consolidated Financial Statements. - 4 -
FDX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) <TABLE> <CAPTION> Three Months Ended Six Months Ended November 30, November 30, --------------------------- ------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ---------- <S> <C> <C> <C> <C> (In thousands, except per share amounts) Revenues........................................ $ 4,209,237 $3,942,018 $8,291,539 $7,808,509 Operating Expenses: Salaries and employee benefits.............. 1,756,999 1,614,592 3,505,115 3,251,633 Purchased transportation.................... 397,142 367,979 768,363 696,685 Rentals and landing fees.................... 347,717 336,254 679,228 628,647 Depreciation and amortization............... 252,196 236,713 502,373 466,857 Maintenance and repairs..................... 236,367 210,436 484,077 423,035 Fuel........................................ 153,710 186,330 303,141 365,068 Other....................................... 728,119 700,765 1,428,412 1,383,730 ---------- ---------- --------- --------- 3,872,250 3,653,069 7,670,709 7,215,655 ---------- ---------- --------- --------- Operating Income................................. 336,987 288,949 620,830 592,854 Other Income (Expense): Interest, net............................... (24,853) (32,110) (50,087) (61,778) Other, net.................................. 270 (120) (2,991) 10,429 ---------- ---------- --------- -------- (24,583) (32,230) (53,078) (51,349) ---------- ---------- --------- -------- Income Before Income Taxes....................... 312,404 256,719 567,752 541,505 Provision for Income Taxes....................... 129,648 106,895 235,617 226,904 ---------- ---------- --------- --------- Net Income....................................... $ 182,756 $ 149,824 $ 332,135 $ 314,601 ========== ========== ========== ========= Earnings per common share: Basic....................................... $ 1.24 $ 1.02 $ 2.25 $ 2.15 ========== ========== ========== ========= Assuming dilution........................... $ 1.23 $ 1.00 $ 2.23 $ 2.11 ========== ========== ========== ========= </TABLE> See accompanying Notes to Condensed Consolidated Financial Statements. - 5 -
FDX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) <TABLE> <CAPTION> Six Months Ended November 30, ---------------------------- 1998 1997 ---------- --------- <S> <C> <C> (In thousands) Net Cash Provided by Operating Activities.................................... $887,115 $671,312 Investing Activities: Purchases of property and equipment, including deposits on aircraft of $100,000 and $6,392,000......................................................... (964,163) (824,303) Proceeds from disposition of property and equipment: Sale-leaseback transactions......................................... 80,995 162,900 Reimbursements of A300 deposits..................................... 25,130 106,991 Other dispositions.................................................. 154,087 121,498 Other, net.............................................................. (692) 5,162 -------- -------- Net cash used in investing activities........................................ (704,643) (427,752) -------- -------- Financing Activities: Short-term borrowings, net.............................................. 422,512 - Proceeds from long-term debt issuances.................................. - 267,105 Principal payments on long-term debt.................................... (167,690) (414,952) Proceeds from stock issuances........................................... 5,753 8,007 Other, net.............................................................. (8,169) (11,337) -------- -------- Net cash provided by (used in) financing activities.................................................................. 252,406 (151,177) -------- -------- Net increase in cash and cash equivalents.................................... 434,878 92,383 Cash and cash equivalents at beginning of period............................. 229,565 161,361 -------- -------- Cash and cash equivalents at end of period................................... $664,443 $253,744 -------- -------- -------- -------- Cash payments for: Interest (net of capitalized interest).................................. $ 56,798 $ 60,886 -------- -------- -------- -------- Income taxes............................................................ $202,257 $212,053 -------- -------- -------- -------- Non-cash investing and financing activities: Fair value of assets surrendered under exchange agreements (with two airlines)............................... $ 26,006 $ 59,718 Fair value of assets acquired under exchange agreements................................................... 14,300 47,606 -------- -------- Fair value of assets surrendered in excess of assets acquired.................................................... $ 11,706 $ 12,112 -------- -------- -------- -------- </TABLE> See accompanying Notes to Condensed Consolidated Financial Statements. - 6 -
FDX CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) BUSINESS COMBINATION AND BASIS OF PRESENTATION On January 27, 1998, Federal Express Corporation ("FedEx") and Caliber System, Inc. ("Caliber") became wholly-owned subsidiaries of a newly-formed holding company, FDX Corporation (the "Company"). In this transaction, which was accounted for as a pooling of interests, Caliber shareholders received 0.8 shares of the Company's common stock for each share of Caliber common stock. Each share of FedEx common stock was automatically converted into one share of the Company's common stock. There were approximately 146,800,000 of $0.10 par value shares so issued or converted. The accompanying financial statements have been restated to include the financial position and results of operations for both FedEx and Caliber for all periods presented. The Company operates on four, three-month quarters with a fiscal year ending May 31. Prior to the current fiscal year, Caliber operated on a 13 four-week period calendar ending December 31, with 12 weeks in each of the first three quarters and 16 weeks in the fourth quarter. FedEx's fiscal year ending May 31 consisted of four, three-month quarters. The Company's consolidated results of operations for the quarter ended November 30, 1997 comprise Caliber's prior year period from August 17, 1997 to November 8, 1997 consolidated with FedEx's quarter ended November 30, 1997. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information, the instructions to Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X, and should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended May 31, 1998. Accordingly, significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed therein. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary to present fairly the consolidated financial position of the Company as of November 30, 1998 and the consolidated results of its operations for the three and six-month periods ended November 30, 1998 and 1997, and its consolidated cash flows for the six-month periods ended November 30, 1998 and 1997. Operating results for the three and six-month periods ended November 30, 1998 are not necessarily indicative of the results that may be expected for the year ending May 31, 1999. Effective June 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." The Statement requires the Company to include within its financial statements information on comprehensive income, which is defined as all activity impacting equity from non-owner sources. For the Company, comprehensive income includes net income and foreign currency translation adjustments. Total comprehensive income, net of taxes, for the three months ended November 30, 1998 and 1997 was $200,055,000 and $143,165,000, respectively. For the six months ended November 30, 1998 and 1997, total comprehensive income, net of taxes, was $335,989,000 and $304,040,000, respectively. Effective June 1, 1998, the Company also adopted Statement of Position ("SOP") 98-1, "Accounting for the Cost of Computer Software Developed or Obtained for Internal Use." SOP 98-1 provides guidance on accounting for these costs, requiring certain of them to be capitalized. For the three and six months ended November 30, 1998, incremental costs of $9,200,000 and $16,400,000, respectively, were capitalized. - 7 -
Certain prior period amounts have been reclassified to conform to the current presentation. (3) LONG-TERM DEBT <TABLE> <CAPTION> November 30, 1998 May 31, (Unaudited) 1998 ------------- ----------- <S> <C> <C> (In thousands) Unsecured notes payable, interest rates of 7.60% to 10.57%, due through 2098.............................. $1,087,974 $1,253,770 Unsecured sinking fund debentures, interest rate of 9.63%, due through 2020................................ 98,564 98,529 Capital lease obligations and tax exempt bonds, interest rates of 5.35% to 7.88%, due through 2017............................................... 254,032 253,425 Less bond reserves............................................. 9,024 9,024 ---------- ---------- 245,008 244,401 Other, interest rates of 9.68% to 9.98%.......................... 44,554 46,009 ---------- ---------- 1,476,100 1,642,709 Less current portion........................................... 114,087 257,529 ---------- ---------- $1,362,013 $1,385,180 ---------- ---------- ---------- ---------- </TABLE> (4) OTHER FINANCING ARRANGEMENTS At November 30, 1998, short-term borrowings comprise commercial paper, net of related discounts. Interest rates on these borrowings approximate 6.2%. As in the past, the Company may from time to time refinance its commercial paper borrowings with the facilities described below. During November, the Company entered into an agreement to obtain a business interruption facility as one component of contingency plans implemented in response to a threatened strike by the Fedex Pilots Association ("FPA"). This agreement became effective December 10, 1998 and provides for a commitment of $1,000,000,000 through December 9, 1999. The facility, which bears interest at LIBOR plus 200 basis points, is cancelable at any time by the Company or immediately upon ratification of a collective bargaining agreement with the FPA. The facility contains various covenants including restrictions on additional indebtedness and potential collateralization of certain assets of the Company and its subsidiaries if the Company's debt rating ceases to be investment grade. In connection with entering into the business interruption facility described above, the Company's existing $1,000,000,000 revolving credit agreement with domestic and foreign banks was amended to allow for the business interruption facility. Concurrently, the Company extended a portion of the agreement. The revolving credit agreement comprises two parts. The first part provides for a commitment of $800,000,000 through January 27, 2003. The second part, which expires initially on January 14, 1999 and was amended to provide a one-year extension through January 14, 2000, provides for a 364-day commitment of $200,000,000. 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. At November 30, 1998, $572,360,000 of the commitment amount was available. - 8 -
(5) 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 November 30, 1998, none of these shares had been issued. (6) COMPUTATION OF EARNINGS PER SHARE The calculation of basic and diluted earnings per share for the three and six-month periods ended November 30, 1998 and 1997 was as follows (in thousands, except per share amounts): <TABLE> <CAPTION> Three Months Ended Six Months Ended November 30, November 30, ---------------------- ---------------------- 1998 1997 1998 1997 -------- -------- -------- -------- <S> <C> <C> <C> <C> Net income applicable to common stockholders.................................. $182,756 $149,824 $332,135 $314,601 ======== ======== ======== ======== Average shares of common stock outstanding................................... 147,554 146,475 147,494 146,406 ======== ======== ======== ======== Basic earnings per share......................... $ 1.24 $ 1.02 $ 2.25 $ 2.15 ======== ======== ======== ======== Average shares of common stock outstanding................................... 147,554 146,475 147,494 146,406 Common equivalent shares: Assumed exercise of outstanding dilutive options............................. 5,374 6,895 5,866 6,947 Less shares repurchased from proceeds of assumed exercise of options................................... (4,002) (4,092) (4,211) (4,359) -------- -------- -------- -------- Average common and common equivalent shares...... 148,926 149,278 149,149 148,994 ======== ======== ======== ======== Diluted earnings per share....................... $ 1.23 $ 1.00 $ 2.23 $ 2.11 ======== ======== ======== ======== </TABLE> (7) COMMITMENTS As of November 30, 1998, the Company's purchase commitments for the remainder of 1999 and annually thereafter under various contracts are as follows (in thousands): <TABLE> <CAPTION> Aircraft- Aircraft Related(1) Other(2) Total -------- ---------- -------- ---------- <S> <C> <C> <C> <C> 1999 (remainder) $ 77,600 $273,100 $312,000 $ 662,700 2000 641,800 565,400 177,100 1,384,300 2001 269,800 509,000 69,500 848,300 2002 240,600 156,200 18,100 414,900 2003 457,400 156,600 - 614,000 </TABLE> (1) Primarily aircraft modifications, rotables and spare parts and engines. (2) Vehicles, facilities, computers and other equipment. FedEx is committed to purchase six Airbus A300s, 33 MD11s and 50 Ayres ALM 200s to be delivered through 2007. Deposits and progress payments of $68,594,000 have been made toward these purchases. - 9 -
FedEx has entered into agreements with two airlines to acquire 53 DC10 aircraft, spare parts, aircraft engines and other equipment, and maintenance services in exchange for a combination of aircraft engine noise reduction kits and cash. Delivery of these aircraft began in 1997 and will continue through 2001. Additionally, these airlines may exercise put options through December 31, 2003, requiring FedEx to purchase up to 29 additional DC10s along with additional aircraft engines and equipment. During the six-month period ended November 30, 1998, FedEx acquired six Airbus A300s under operating leases. These aircraft were included as purchase commitments as of May 31, 1998. At the time of delivery, FedEx sold its rights to purchase these aircraft to third parties who reimbursed FedEx for its deposits on the aircraft and paid additional consideration. FedEx then entered into operating leases with each of the third parties who purchased the aircraft from the manufacturer. Lease commitments added since May 31, 1998 for the six Airbus A300s and one MD11 purchased in the first quarter of 1999 and subsequently sold and leased back, are as follows (in thousands): <TABLE> <S> <C> 1999 $ 19,800 2000 37,100 2001 36,800 2002 38,400 2003 38,200 Thereafter 788,700 </TABLE> (8) LEGAL PROCEEDINGS Customers of FedEx have filed four separate class-action lawsuits against FedEx generally alleging that FedEx has breached its contract with the plaintiffs in transporting packages shipped by them. These lawsuits allege that FedEx continued to collect a 6.25% federal excise tax on the transportation of property shipped by air after the tax expired on December 31, 1995, until it was reinstated in August 1996. The plaintiffs seek certification as a class action, damages, an injunction to enjoin FedEx from continuing to collect the excise tax referred to above, and an award of attorneys' fees and costs. Three of those cases were consolidated in Minnesota Federal District Court. That court stayed the consolidated cases in favor of a case filed in Circuit Court of Greene County, Alabama. The stay was lifted in July 1998. The complaint in the Alabama case also alleges that FedEx continued to collect the excise tax on the transportation of property shipped by air after the tax expired again on December 31, 1996. A fifth case, filed in the Supreme Court of New York, New York County, containing allegations and requests for relief substantially similar to the other four cases was dismissed with prejudice on FedEx's motion on October 7, 1997. The Court found that there was no breach of contract and that the other causes of action were preempted by federal law. The plaintiffs have appealed. This case originally alleged that FedEx continued to collect the excise tax on the transportation of property shipped by air after the tax expired on December 31, 1996. The New York complaint was later amended to cover the first expiration period of the tax (December 31, 1995 through August 27, 1996) covered in the original Alabama complaint. The air transportation excise tax expired on December 31, 1995, was reenacted by Congress effective August 27, 1996, and expired again on December 31, 1996. The excise tax was then reenacted by Congress effective March 7, 1997. The expiration of the tax relieved FedEx of its obligation to pay the tax during the periods of expiration. The Taxpayer Relief Act of 1997, signed by President Clinton in August 1997, extended the tax for 10 years through September 30, 2007. - 10 -
FedEx intends to vigorously defend itself in these cases. No amount has been reserved for these contingencies. The Company and its subsidiaries are subject to other legal proceedings and claims which arise in the ordinary course of their business. In the opinion of management, the aggregate liability, if any, with respect to these other actions will not materially adversely affect the financial position or results of operations of the Company. - 11 -
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 November 30, 1998, and the related condensed consolidated statements of income for the three and six-month periods ended November 30, 1998 and 1997 and the condensed consolidated statements of cash flows for the six-month periods ended November 30, 1998 and 1997, included herein, as indicated in their report thereon included on page 13. - 12 -
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 November 30, 1998 and the related condensed consolidated statements of income for the three and six-month periods ended November 30, 1998 and 1997 and the condensed consolidated statements of cash flows for the six-month periods ended November 30, 1998 and 1997. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical review procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of FDX Corporation and subsidiaries as of May 31, 1998 and the related consolidated statements of income, changes in common stockholders' investment and cash flows for the year then ended. In our report dated July 8, 1998, we expressed an unqualified opinion on those financial statements, which are not presented herein. In our opinion, the accompanying condensed consolidated balance sheet of FDX Corporation and subsidiaries as of May 31, 1998, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. /s/ Arthur Andersen LLP Arthur Andersen LLP Memphis, Tennessee December 16, 1998 - 13 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS For the second quarter ended November 30, 1998, the Company recorded consolidated net income of $183 million ($1.23 per share, assuming dilution) on revenues of $4.2 billion compared with net income of $150 million ($1.00 per share, assuming dilution) on revenues of $3.9 billion for the same period in the prior year. For the six months ended November 30, 1998, the Company recorded consolidated net income of $332 million ($2.23 per share, assuming dilution) on revenues of $8.3 billion compared with net income of $315 million ($2.11 per share, assuming dilution) on revenues of $7.8 billion for the same period in the prior year. These results reflect improved domestic operations at Federal Express Corporation ("FedEx"), RPS, Inc. ("RPS") and Viking Freight, Inc.("Viking"). The prior year's year-to-date results of operations included the impact of the Teamsters strike against United Parcel Service ("UPS") in August 1997. During the 12 operating days of the strike, FedEx delivered approximately 800,000 additional U.S. domestic express packages per day, and RPS delivered approximately 300,000 additional packages per day. The Company analytically calculated that the volume not retained at the end of the first quarter of 1998 contributed approximately $170 million in revenues and approximately $.25 additional earnings per share to that quarter. Revenues The following table shows a comparison of revenues (in millions): <TABLE> <CAPTION> Second Quarter YTD Period Ended Ended November 30, November 30, ------------------- Percent ------------------- Percent 1998 1997 Change 1998 1997 Change -------- -------- --------- -------- -------- --------- <S> <C> <C> <C> <C> <C> <C> FedEx: U.S. domestic express......................... $2,442 $2,266 + 8 $4,865 $4,601 + 6 International Priority (IP)................... 762 699 + 9 1,487 1,354 +10 International Express Freight (IXF) and Airport-to-Airport (ATA)..................................... 139 166 -17 272 317 -14 Charter, Logistics services and other................................. 139 168 -17 275 324 -15 ------ ------ ------ ------ 3,482 3,299 + 6 6,899 6,596 + 5 ----- ------ ------ ------ RPS .......................................... 481 420 +14 921 778 +18 Viking .......................................... 94 88 + 7 190 190 -- Other .......................................... 152 135 +13 282 245 +15 ------ ------ ------ ------ $4,209 $3,942 + 7 $8,292 $7,809 + 6 ====== ====== ====== ====== </TABLE> - 14 -
The following table shows a comparison of selected operating statistics (packages, pounds and shipments in thousands): <TABLE> <CAPTION> Second Quarter YTD Period Ended Ended November 30, November 30, -------------------- Percent -------------------- Percent 1998 1997 Change 1998 1997 Change -------- -------- --------- -------- -------- --------- <S> <C> <C> <C> <C> <C> <C> FedEx: U.S. domestic express: Average daily packages.................... 2,860 2,732 + 5 2,791 2,712 + 3 Revenue per package....................... $13.55 $13.17 + 3 $13.51 $13.36 + 1 IP: Average daily packages.................... 285 265 + 8 275 256 + 8 Revenue per package....................... $42.45 $41.89 + 1 $41.96 $41.73 + 1 IXF/ATA: Average daily pounds...................... 2,719 2,984 - 9 2,669 2,816 - 5 Revenue per pound......................... $ .81 $ .88 - 8 $ .79 $ .89 -11 Operating weekdays............................ 63 63 129 127 RPS: Average daily packages.................... 1,464 1,410 + 4 1,386 1,322 + 5 Revenue per package....................... $ 5.30 $ 5.05 + 5 $ 5.28 $ 5.03 + 5 Operating weekdays............................ 62 59 126 117 Viking: Shipments per day......................... 13.1 12.9 + 1 12.9 14.9 -14 Revenue per hundred weight................ $ 9.76 $ 9.52 + 3 $ 9.70 $ 9.06 + 7 Operating weekdays............................ 62 59 127 117 </TABLE> FedEx's U.S. domestic package revenue rose as both package volume and revenue per package (yield) increased for the quarter and year-to-date periods. During these periods, FedEx experienced increased volume of its higher-priced, overnight services and increased average weight per package. Both of these factors contributed to the rise in U.S. domestic yield for the quarter and six-month periods. A threatened strike by the Fedex Pilots Association ("FPA") in late November had a nominal negative effect on U.S. domestic package volume growth. The year-to-date results for the prior year included the additional volume during the UPS strike, which was primarily in the deferred service category and generally at list price. Excluding the revenue and volume associated with the UPS strike and the proceeds from a temporary fuel surcharge in the prior year, U.S. domestic average daily package volume and yield increased 5% and 3% year over year, respectively, for the six-month period. Management expects total U.S. domestic express package volume in 1999 to continue to grow at a lower rate than that experienced in the past two fiscal years. Management believes that U.S. domestic yield should remain stable or increase slightly, year over year, during the remainder of 1999 due to continued effects of yield-management actions and FedEx's improved ability to capture incremental revenue due to it based upon certain package characteristics, such as weight and package dimensions. Actual results may vary depending on the impact of domestic economic conditions, competitive pricing changes, customer responses to yield-management initiatives and changing customer demand patterns. FedEx's IP revenue increased 9% and 10% for the quarter and year-to-date periods, respectively, as average daily packages and yields increased during - 15 -
these periods. FedEx's IP volume growth rates continue to lag behind those experienced in prior years primarily due to weakness in Asian markets, especially in U.S. outbound traffic to that region. IP yields increased 1% for the quarter and year-to-date periods as FedEx initiated limited pricing changes to offset various international currency fluctuations. Management expects IP growth rates to be constrained during the remainder of the fiscal year, primarily due to continuing international economic weakness. Management expects IP yields to remain constant or improve slightly as a result of currency-related pricing changes. Actual IP results will depend on international economic conditions, actions by FedEx's competitors and regulatory conditions for international aviation rights. FedEx's airfreight (IXF/ATA) volume, revenue and yield declined year over year for the quarter and six-month periods. IXF volume (a space-confirmed, time-definite service) decreased 2% for the quarter and was flat year-to-date, but yield declined 9% and 11% for the same periods. ATA volume (a lower-priced, space-available service) decreased 23% and 16% for the quarter and year-to-date periods, respectively, with yield lower by 13% and 14% for the same periods. Management expects airfreight volume and yield to continue to decline, year over year, through the balance of 1999. Due to the impact of difficult international economic conditions on IP and airfreight traffic, management has adjusted FedEx's expansion and aircraft deployment plans accordingly. Actual airfreight results will depend on international economic conditions, actions by FedEx's competitors, including capacity fluctuations, and regulatory conditions for international aviation rights. RPS's year-over-year revenue growth of 14% and 18% for the quarter and year-to-date periods reflected three and nine additional operating days in these current year periods. For the second quarter and six-month period ending November 30, 1998, RPS's revenue increased 9% and 13% year over year after adjusting for the additional operating days and the incremental revenue associated with the UPS strike. This revenue growth is a result of 4% and 7% increases in average daily volume, after adjusting for the prior year's strike-related volume, and a 5% increase in yields for both periods. Yields improved primarily as a result of various yield-management actions, including a 3.7% rate increase in February 1998. RPS's year-over-year comparison for the third quarter will be impacted by a difference in the number of operating weekdays in these periods. The current year's third quarter will have 62 operating weekdays; whereas, the prior year's third quarter (November 9, 1997 to February 28, 1998) had 75 operating weekdays. Revenue increased 2% for the quarter and decreased 8% for the year-to-date period on a daily basis considering three and ten additional operating days in the current year for these periods. Viking's prior year year-to-date revenues and shipment statistics reflect the operations of Central Freight Lines Inc., which was sold at the end of June 1997 in conjunction with Viking's restructuring in March 1997. Revenue per hundredweight increased 3% and 7% for the quarter and six months ended November 30, 1998, respectively. Operating Expenses The increase in salaries and employee benefits for the quarter and year-to-date periods was primarily driven by volume-related increases at FedEx. Salaries and wages, as well as group insurance, increased for these periods primarily due to an increase in the number of employees. - 16 -
The increases in purchased transportation for the quarter and year-to-date periods were primarily related to volume growth at RPS. A 3% and 8% increase in rentals and landing fees for the quarter and year-to-date periods, respectively, was primarily due to additional facilities being leased by FedEx. The current year's expense includes additional building leases at the Indianapolis and Alliance-Fort Worth hubs. In the second quarter, supplemental aircraft lease and equipment lease expense declined year over year. In the prior year's second quarter, supplemental leased aircraft had been added to meet the demands of increased package volume during peak season and to replace an MD11 destroyed in July 1997, whereas in the current quarter, leased fleet aircraft were available for capacity needs. As of November 30, 1998, FedEx had 93 wide-bodied aircraft under operating lease compared with 84 as of November 30, 1997. During the six-month period, the additional leased fleet aircraft contributed to the rise in rental and landing fees. The prior year's first quarter expense was favorably impacted by approximately $9 million of a $17 million net gain resulting from the destruction of a leased MD11 aircraft in an accident in July 1997 (described below in Other Income and Expense). Management expects year-over-year increases in lease expense to continue as FedEx enters into additional aircraft rental agreements during 1999 and thereafter. FedEx expects to be able to convert its A300 purchase commitments into direct operating leases. (See Note 7 of Notes to Condensed Consolidated Financial Statements.) Maintenance and repairs expense increased 12% and 14% for the quarter and year-to-date periods, respectively, primarily due to higher year-over-year engine maintenance expense on MD11 and B727 aircraft. In the first quarter of 1998, an accrual for the disposition of leased B747 aircraft was increased $9 million, with the majority of this increase recorded as maintenance and repairs expense. Management believes that maintenance and repairs expense will continue a long-term trend of year-over-year increases for the foreseeable future due to the increasing size and age of FedEx's fleet and the variety of aircraft types. Fuel expense fell 18% and 17% for the quarter and six-month periods, respectively, primarily as a result of declines in jet fuel price per gallon (22% and 23%, respectively), partially offset by increases in jet fuel gallons consumed (2% and 6%, respectively). The prior year's fuel expense included payments made by FedEx under contracts which were designed to limit FedEx's exposure to fluctuations in jet fuel prices. Effective August 1, 1997, FedEx lifted its temporary 2% fuel surcharge that had been in place on certain U.S. domestic and U.S. export shipments. This surcharge was implemented on February 3, 1997 to mitigate the impact of rising jet fuel prices. Other operating expense increased 4% and 3% for the quarter and year-to-date periods, respectively. Other operating expense includes temporary labor and other outside service contracts, communications expense and the cost of sales of engine noise reduction kits. On October 30, 1998, contract negotiations between FedEx and the FPA were discontinued. In November, the FPA began actively encouraging its members to decline all overtime work and issued ballots seeking strike authorization. To avoid service interruptions related to a threatened strike, the Company and FedEx began strike contingency planning including entering into agreements for additional third party air and ground transportation and establishing special financing arrangements. Subsequently, the FPA agreed to end all job actions for 60 days and negotiations resumed. Such negotiations have resulted in a tentative agreement subject to ratification by the FPA membership in February 1999. Costs associated with these contingency plans, including contracts for supplemental airlift and ground transportation, are expected to reduce pretax earnings between $110 million to $120 million, adversely affecting FedEx's earnings for the second half of 1999. These costs did not materially affect the second quarter. - 17 -
Operating Income The Company's consolidated operating income increased 17% and 5% for the quarter and year-to-date periods, respectively, from the prior year. Excluding the impact of the UPS strike in the prior year, operating income increased 16% for the year-to-date period due to improved results domestically at FedEx, RPS and Viking. FedEx's U.S. domestic operating income was $217 million and $422 million for the quarter and year-to-date periods ended November 30, 1998. Prior year amounts were $167 million and $408 million for these same periods. The prior year's first quarter operating income included approximately $50 million related to the UPS strike as well as proceeds from a 2% temporary fuel surcharge through August 1, 1997. Excluding these prior year factors, operating income increased 30% and 26% for the quarter and year-to-date periods. These increases were due to yield increases (2.9% and 2.6% for the quarter and year-to-date periods, respectively) exceeding increases in cost per package (0.8% for the quarter and year-to-date periods) and package volume growth of 5% for both of these periods. Cost per package rose only slightly for the periods primarily due to lower jet fuel prices, the effect of cost controls and increased productivity through higher service levels. Sales of engine noise reduction kits contributed $28 million and $57 million to U.S. domestic operating income in the second quarter and year-to-date periods ended November 30, 1998, compared with $34 million and $71 million in the same periods in the prior year. FedEx's U.S. domestic operating margins were 8.6% and 8.4% for the quarter and six-month periods, respectively, compared with 7.1% and 8.5% (7.1% and 7.2%, excluding the aforementioned prior year items) for the same periods in the prior year. FedEx's international operating income was $34 million and $48 million for the quarter and year-to-date periods, respectively, compared with $46 million and $70 million for the same periods of the prior year. International operating results declined as a result of slower IP volume growth and declining airfreight volumes and yields at a time of year-over-year capacity increases. Fixed costs associated with the increased capacity, including salaries and employee benefits and aircraft lease expense, also negatively impacted international results, but were partially offset by lower fuel costs. FedEx's international operating margins were 3.5% and 2.5% for the quarter and year-to-date periods, respectively, compared with 4.9% and 3.8% for the same periods in the prior year. RPS reported operating income of $61 million and $110 million for the second quarter and first six months of 1999, respectively, compared with $54 million and $89 million for these periods of the prior year. The current quarter and year-to-date periods have three and nine additional operating days, respectively, as compared to the same periods of the prior year. The prior year's results include approximately $6 million of operating income related to the UPS strike. RPS achieved operating margins of 12.7% and 11.9% for the quarter and year-to-date periods, respectively, compared with 12.9% and 11.4% for the same periods in the prior year due to continued package volume growth and yield-management actions. Viking's operating income for the quarter and year-to-date periods was $7 million and $14 million, respectively, compared with $6 million and $1 million in the prior year. Prior year results include the operations of divisions that were subsequently sold or shut down. Viking's operating margins were 7.1% and 7.4% for the quarter and year-to-date periods, respectively, compared with 6.8% and 0.5% for the same periods in the prior year. Other Income and Expense Net interest expense declined 23% and 19% for the quarter and year-to-date periods, respectively, due to lower average debt levels at the Company. - 18 -
Other, net for the prior year's first quarter included a gain from an insurance settlement for an MD11 aircraft destroyed in an accident in July 1997. At that time, FedEx realized a net gain of $17 million from the insurance settlement and the release from certain related liabilities on the leased aircraft. Approximately $8 million of this gain was recorded in non-operating income. FINANCIAL CONDITION Liquidity Cash and cash equivalents totaled $664 million at November 30, 1998, an increase of $435 million since May 31, 1998, reflecting additional short-term borrowings in anticipation of potential job actions by the FPA. Cash provided from operations for the first six months of 1999 was $887 million compared with $671 million for the same period in the prior year. The Company currently has a $1.0 billion bank revolving credit facility (of which $572 million was available at November 30, 1998) that is generally used to finance temporary operating cash requirements and to provide support for the issuance of commercial paper. In December 1998, the Company established a $1.0 billion business interruption facility with a 364-day maturity to fund, among other things, working capital needs and contingency plan expenses in the event of an actual or threatened business interruption due to labor issues with the FPA. In addition, the Company amended its existing $1.0 billion revolving credit agreement to allow for this business interruption facility. Concurrently, the Company extended part of the agreement, previously expiring in January 1999, to January 2000. See Note 4 of Notes to Condensed Consolidated Financial Statements for additional information about the Company's financing arrangements. Management believes that cash flow from operations, the commercial paper program, the bank revolving credit facility and the business interruption facility will adequately meet the Company's working capital needs for the foreseeable future. Capital Resources The Company's operations are capital intensive, characterized by significant investments in aircraft, vehicles, computer and telecommunication equipment, package handling facilities and sort equipment. The amount and timing of capital additions depend on various factors including global economic conditions, volume growth, new or enhanced services, geographical expansion of services, competition, availability of satisfactory financing and actions of regulatory authorities. Capital expenditures for the first six months of 1999 totaled $964 million and included one MD11, aircraft modifications, vehicles and ground support equipment and customer automation and computer equipment. In comparison, prior year expenditures totaled $824 million and included two MD11's, aircraft modifications, vehicles and ground support equipment and customer automation and computer equipment. An MD11 purchased in June 1998 was sold and leased back in September 1998. In June and September 1997, two MD11's purchased in February and June 1997 were sold and leased back. For information on the Company's purchase commitments, see Note 7 of Notes to Condensed Consolidated Financial Statements. Proceeds from the disposition of property and equipment for the year-to-date period ended November 30, 1997 included proceeds from the sale of Viking's southwestern division and other assets in conjunction with the restructuring of Viking's operations. - 19 -
Management believes that the capital resources available to the Company provide flexibility to access the most efficient markets for financing capital acquisitions, including aircraft, and are adequate for the Company's future capital needs. Market Risk Sensitive Instruments and Positions There have been no material changes in the Company's market risk sensitive instruments and positions since May 31, 1998. A description of these instruments and positions is disclosed in the Company's Annual Report on Form 10-K for the year ended May 31, 1998. Euro Currency Conversion On January 1, 1999, the euro became the common legal currency of 11 of the 15 member countries of the European Union. On that date, the participating countries fixed conversion rates between their existing sovereign currencies ("legacy currencies") and 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. Costs associated with the euro project are being expensed as incurred and are being funded entirely by internal cash flows. Since January 1, 1999, the Company's subsidiaries have been prepared to quote rates to customers, generate billings and accept payments in both euros 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 are not likely to have a material impact on the Company's consolidated financial position, results of operations or 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 more than a million customers via its proprietary products and technologies. The Company's Year 2000 ("Y2K") computer compliance issues are, therefore, broad and complex. The FedEx Y2K Project Office, which was established in 1996, coordinates and supports FedEx's Y2K compliance effort. The Company has 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. - 20 -
State of Readiness Generally, the Company believes that FedEx's Y2K compliance effort is on schedule. The Company's other operating subsidiaries have accelerated their Y2K programs, and they are now substantially on schedule. FedEx's compliance effort for all business-critical infrastructure and applications software (collectively, "IT Systems") is 95% complete. FedEx has inventoried all IT Systems. Assessment/design (researching the compliance status and determining the impact of, and renovation requirements for, IT Systems) and renovation (making IT Systems compliant) are substantially complete. Testing, which involves validating compliance, is approximately 95% complete. Within IT Systems, certification of application software, which involves FedEx's independent, internal review to verify that the appropriate testing process has occurred, was approximately 95% complete as of December 31, 1998. Certification of the operating system software and program product software, (collectively, "infrastructure") at FedEx is 55% complete. FedEx's IT Systems compliance effort is targeted to be 100% complete by September 1, 1999. The Company's other operating subsidiaries have completed the inventory and assessment phases relating to business-critical IT Systems. The remaining phases relating to IT Systems are underway. The IT Systems compliance effort of the Company's other operating subsidiaries is targeted to be 100% complete by November 1, 1999. The inventory and assessment phases of FedEx's Y2K program relating to business-critical purchased hardware and software, customized software applications, facilities/equipment and other embedded chip systems (collectively, "Non-IT Systems") are 100% complete. The remaining phases relating to FedEx's Non-IT Systems are targeted for completion by May 31, 1999. FedEx is 45% complete with the remediation effort on Non-IT Systems. The inventory and assessment phases relating to the Non-IT Systems of the Company's other operating subsidiaries are targeted for completion by July 31, 1999, with the remaining phases targeted to be complete by November 1, 1999. Y2K Interfaces with Material Third Parties FedEx and the Company's other 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, vendors and suppliers) whose Y2K non-compliance could either have a material adverse effect on the Company's business, financial condition or results of operations or involve a safety risk to employees or customers. 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's vendor and product compliance program includes the following tasks: assessing vendor compliance status; product testing; tracking vendor compliance progress; developing contingency plans, including identifying alternate suppliers, as needed; addressing contract language; replacing, renovating or upgrading parts; requesting presentations from vendors or making on-site assessments, as required; and sending questionnaires. Failure to respond to these questionnaires results in further mail or phone correspondence, contingency plan development or vendor/product replacement. The Company's other operating subsidiaries have begun to develop a supply chain dependency model to assess the risk levels associated with the Y2K non-compliance of material third parties. - 21 -
Testing FedEx's Y2K testing effort includes functional testing of remedial measures and regression testing to validate that changes have not altered existing functionality. FedEx's test plans include sections which define the scope of the testing effort, roles and responsibilities of test participants, the test approach planned, software, hardware and data requirements, and test environments/techniques to be used, as well as other sections defining the test effort. System functionality for future date accuracy is being verified and documented. A separate homogenous Y2K mainframe environment has been created to test all operating system software and program product software. The Y2K environment is designed to accomplish future date "end to end" testing of the larger applications and to validate interface communications between applications. FedEx uses an independent, internal process to verify that the appropriate testing process has occurred. Costs to Address Y2K Compliance Since 1996, the Company has incurred approximately $70 million in expense on Y2K compliance which includes internal and external software/hardware analysis, repair and related costs. The Company expects that its Y2K compliance efforts will require additional total costs of approximately $80 million, including capital expenditures of $14 million. In order to provide a consistent, objective method for identifying financial resources consumed for Y2K efforts, the Company classifies expenditures as Y2K costs for reporting purposes if they remedy only Y2K risks 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, 1999, Y2K expenditures are expected to represent 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 has begun developing contingency plans for Y2K non-compliance. These plans will include identifying alternate suppliers, vendors, procedures and operational sites, generating supply/equipment lists, conducting staff training and developing communication plans. Any significant incremental costs associated with these plans will not become known until these plans are fully developed. A FedEx-wide contingency planning task force has been formed to ensure appropriate coverage and coordination of these plans and to integrate these with FedEx's existing contingency plans. FedEx's goal for completion of key Y2K contingency plans is January 31, 1999, with all other Y2K contingency plans targeted for completion by September 30, 1999. FedEx plans to establish a contingency command and control center by April 30, 1999 to address any issues caused by Y2K non-compliance, with key personnel on call beginning in November 1999. The Company's other operating subsidiaries are beginning to formulate their contingency plans for Y2K non-compliance. Their goal for completion of key Y2K contingency plans is May 31, 1999. Due to the general uncertainty inherent in the Company's Y2K compliance, mainly resulting from the Company's dependence upon the Y2K compliance of the government agencies, third-party suppliers, vendors and customers with whom the Company deals, the Company is unable to determine at this time the most reasonably likely worst case scenario. However, the Company believes that the greatest Y2K exposure exists in the following areas: lack of readiness of airports, air traffic and customs systems and the global utilities and telecommunications infrastructure; lack of compliance and business continuance - 22 -
capabilities of suppliers, vendors, customers and independent contractors; and lack of readiness of third party pick-up and delivery providers on whom FedEx relies in some offshore locations. The Company believes, however, that the Y2K programs in place at each of its operating subsidiaries, including related contingency planning, should lessen significantly the possibility of substantial interruptions of normal operations. While costs related to the lack of Y2K compliance of third parties, business interruptions, litigation and other liabilities related to Y2K issues could materially and adversely affect the Company's business, results of operations and financial condition, the Company expects its Y2K compliance efforts to reduce significantly the Company's level of uncertainty about the impact of Y2K issues affecting both its IT Systems and Non-IT Systems. Statements in this "Management's Discussion and Analysis of Results of Operations and Financial Condition" or made by management of the Company which contain more than historical information may be considered forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) which are subject to risks and uncertainties. Actual results may differ materially from those expressed in the forward-looking statements because of important factors identified in this section. - 23 -
PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Note 7 Legal Proceedings in Part I is hereby incorporated by reference. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. <TABLE> <CAPTION> Exhibit Number Description of Exhibit --------- ----------------------- <S> <C> 10.1 Credit Agreement dated as of December 10, 1998 among the Company, Morgan Guaranty Trust Company of New York, as Paying Agent, and certain Lenders. 10.2 Amendment No. 1 dated as of December 10, 1998 to Credit Agreement dated as of January 15, 1998 among the Company, The First National Bank of Chicago, as Agent, and certain Lenders. 10.3 Amendment No. 2 (Temporary) dated as of December 10, 1998 to Credit Agreement dated as of January 15, 1998 among the Company, The First National Bank of Chicago, as Agent, and certain Lenders. 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 November 30, 1998. - 24 -
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: January 11, 1999 /s/ JAMES S. HUDSON ---------------------------- JAMES S. HUDSON CORPORATE VICE PRESIDENT STRATEGIC FINANCIAL PLANNING & CONTROL (PRINCIPAL ACCOUNTING OFFICER) - 25 -
EXHIBIT INDEX <TABLE> <CAPTION> Exhibit Number Description of Exhibit - -------- ---------------------- <S> <C> 10.1 Credit Agreement dated as of December 10, 1998 among the Company, Morgan Guaranty Trust Company of New York, as Paying Agent, and certain Lenders. 10.2 Amendment No. 1 dated as of December 10, 1998 to Credit Agreement dated as of January 15, 1998 among the Company, The First National Bank of Chicago, as Agent, and certain Lenders. 10.3 Amendment No. 2 (Temporary) dated as of December 10, 1998 to Credit Agreement dated as of January 15, 1998 among the Company, The First National Bank of Chicago, as Agent, and certain Lenders. 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