FedEx Annual Report 1998

Plain-text annual report

F D X C O R P O R A T I O N A N N U A L R E P O R T 1 9 9 8 F D X C O R P O R A T I O N A N N U A L R E P O R T 1 9 9 8 On January 27, 1998, Federal On January 27, 1998, Federal Express Corporation launched a Express Corporation launched a new era in transportation – new era in transportation – again. Twenty-five years after it again. Twenty-five years after it founded the express distribu- founded the express distribu- tion industry, FedEx acquired tion industry, FedEx acquired the Caliber System, Inc. compa- the Caliber System, Inc. compa- nies, leaders in ground small- nies, leaders in ground small- package delivery, surface expedited shipping, less-than-truckload freight and integrated logistics management. From this historic union emerged a new brand of transportation leadership: FDX Corporation, a $16 billion distribution and logistics powerhouse. With its unprecedented portfolio = A N E W B R A N D O F L E A D E R S H I P = A N E W B R A N D O F L E A D E R S H I P of shipping and logistics services, FDX is uniquely equipped to provide the comprehensive distribution solutions customers seek in today’s fast, competitive, interconnected global marketplace. The service, technology and marketing synergies created by FDX unlock exciting new opportunities for stockholders. In this inaugural annual report to FDX stockholders, you’ll dis- cover why the acquisition of Caliber System by FedEx involved more than simple addition – why for customers and stockholders alike, FDX equals a whole far greater than the sum of its parts. =A WHOLE GREATER =A WHOLE GREATER THAN THE SUM OF ITS PARTS THAN THE SUM OF ITS PARTS On January 27, 1998, Federal On January 27, 1998, Federal Express Corporation launched a Express Corporation launched a new era in transportation – new era in transportation – again. Twenty-five years after it again. Twenty-five years after it founded the express distribu- founded the express distribu- tion industry, FedEx acquired tion industry, FedEx acquired the Caliber System, Inc. compa- the Caliber System, Inc. compa- nies, leaders in ground small- nies, leaders in ground small- package delivery, surface expedited shipping, less-than-truckload freight and integrated logistics management. From this historic union emerged a new brand of transportation leadership: FDX Corporation, a $16 billion distribution and logistics powerhouse. With its unprecedented portfolio = A N E W B R A N D O F L E A D E R S H I P = A N E W B R A N D O F L E A D E R S H I P of shipping and logistics services, FDX is uniquely equipped to provide the comprehensive distribution solutions customers seek in today’s fast, competitive, interconnected global marketplace. The service, technology and marketing synergies created by FDX unlock exciting new opportunities for stockholders. In this inaugural annual report to FDX stockholders, you’ll dis- cover why the acquisition of Caliber System by FedEx involved more than simple addition – why for customers and stockholders alike, FDX equals a whole far greater than the sum of its parts. =A WHOLE GREATER =A WHOLE GREATER THAN THE SUM OF ITS PARTS THAN THE SUM OF ITS PARTS =A $400 BILLION =A $400 BILLION P 2 To Our Stockholders: During ﬁscal year 1998, FedEx celebrated its 25th year of industry leadership by laying the foundation for future growth with the acquisition of Caliber System, Inc., and the creation of FDX Corporation. Our consolidated results for the year were strong, revealing a $16 billion company with net income of $583 million, excluding merger expenses. Frederick W. Smith Chairman, President and Chief Executive Ofﬁcer Earnings per share rose to a record $3.91. We are pleased with our ﬁnancial achievements and excited about our growth opportunities. FDX is poised to take advantage of a global transportation market that – with the express, less-than-truckload and ground small-package MARKET OPPORTUNITY MARKET OPPORTUNITY segments combined – is projected to grow from $75 billion today to nearly $400 billion over the next 20 years. Once again, we have changed the competitive landscape, creat- ing a one-stop source for global shipping and logistics solutions. No other corporation is better situated to take advantage of business trends such as “just-in-time” shipping, the explosive growth of elec- tronic commerce, and the proliferation of global sourcing and selling across markets. Prior to the acquisition, neither FedEx nor RPS individually could offer the same com- plementary mix of express and ground small-package delivery services. Now – operating independently yet CHAIRMAN(cid:213)S LETTER P 3 working together under FDX – we’re winning busi- ness from our competitors by providing unmatched service, access and connectivity. When we announced the formation of FDX Corporation, many observers assumed that the Caliber acquisition made sense only if we fully integrated our operations. Based on 25 years of industry leader- ship and expertise, we are doing just the opposite – and for compelling strategic reasons. Simply layering the unique resource and operating requirements of a time-deﬁnite, global, express-delivery network onto a day-definite, ground small-package network would surely result in diminished service quality and increased costs. =COMPLETE ONE =COMPLETE ONE Under the FDX umbrella, we will leverage our shared strengths while operating each delivery network independently, with each focused on its respective markets. For FedEx, that means an unrelenting dedication to rapid, time-speciﬁc global delivery in 1, 2 or 3 business days. For RPS, that means continued commit- ment to its highly efﬁcient and reliable, business-to-business, ground small-package delivery capability. The result for all FDX companies is optimal service quality, reliability and proﬁtability. To capitalize on the synergies of our shared cus- tomer relationships, we are aggressively aligning sales and marketing initiatives across all FDX P 4 CHAIRMAN(cid:213)S LETTER companies, with particular attention to our primary opportunities – FedEx and RPS. We have identiﬁed more than one million FedEx customers who cur- rently have no relationship with RPS. Conversely, tens of thousands of RPS customers do not use FedEx for their inter- national or U.S. domestic express shipments. Given an opportunity to obtain the best of both delivery services, we ﬁnd many businesses eager to become full-ﬂedged “FDX customers.” FDX is now positioned to meet customer needs by providing comprehensive transportation, logistics and supply chain management solutions. -STOP SHIPPING + + + -STOP SHIPPING Increasingly, businesses are seeking strategic, cost-effective ways to manage their supply chains – the series of transportation and information exchanges required to convert parts and raw materials into ﬁnished, delivered products. Experience tells us that customers prefer one supplier to meet all of their distribution and logistics needs. And FDX has what it takes: Our unique global network, operational expertise and air route authorities cannot be repli- cated by the competition. With FDX, our cus- tomers have a strategic competitive weapon to squeeze time, mass and cost from the supply chain. CHAIRMAN(cid:213)S LETTER P 5 Looking ahead, FDX will seize opportunities to drive revenue growth and build bottom-line results for our stockholders. We are focused on three primary growth strategies: 1) A collabora- tive sales process that leverages our shared customer relationships; 2) Aggressive global marketing of the broad FDX portfolio to tar- geted prospective customers; and 3) Strategic application of infor- mation systems to reduce costs and improve customer access and connectivity. We see a very bright future for FDX – and we’re not alone in our conﬁdence. In June 1998, Wired magazine selected FDX as one of 40 “New Blue Chips,” companies that are “building the new =A NEW BRAND =A NEW BRAND economy (using) technology, networks and information to reshape the world.” Of the 40 companies cited for possessing fundamental quali- ties necessary to succeed in a fast-changing economy – globalism, communication, innovation, technology and strategic vision – FDX was the only company deemed to possess all ﬁve fundamentals as core business elements. Thank you for your investment of capital and con- ﬁdence in this new brand of leadership we call FDX. We expect to reward your investment by demonstrating that FDX equals a historic opportunity for growth, proﬁtability and market leadership. Frederick W. Smith Chairman, President and Chief Executive Ofﬁcer P 6 CHAIRMAN(cid:213)S LETTER OF LEADERSHIP OF LEADERSHIP + + + P 7 == P 8 SEND A MESSAGE JTECH More than one million JTECH pagers have been shipped around the world to hospitals, factories, auto dealerships, even church nursery centers. But perhaps the most critical shipments are the FedEx boxes that arrive just in time for Mother's Day, the busiest day of the year for restaurants. At Outback Steakhouse and other restaurants, customers hold on to the short-range pagers so they can be alerted when a table is ready, freeing them to stroll or browse nearby shops. Less urgent deliveries of replacement pagers or new orders are delivered via RPS. By using FDX services, JTECH sends a message to its customers: Your order will be there. TOTAL SOLUTIONS TOTAL SOLUTIONS P 9 P 1 0 BUILD TO ORDER DELL COMPUTER CORPORATION Dell revolutionized the computer industry with a customer-focused direct business model that’s lean on inventory and cycle time, but long on logistics efﬁciencies, customization and customer delight. The company turns inventory in fewer than eight days, compared with 60 to 90 days through more tradi- tional indirect competitors. To keep its supply chain tight, Dell has FedEx deliver computers and parts from its factory in Malaysia to its largest Asian market – Japan. In North America, Caliber Logistics provides distribution and ﬂeet management services for Dell facilities in Austin, Texas. FedEx, meanwhile, handles the express deliveries of several Dell products, displaying a commitment to velocity, quality and customer service that mirrors Dell’s own uniquely successful approach to business. P 1 1 CALCULATE THE MOVES UNISYS CORP. When a large corporation decentralizes shipping, it’s like a computer’s circuitry ﬁring at random: interesting pyrotechnics, but not very productive. That’s why Unisys chose to harness the buying power of hundreds of sales ofﬁces, service locations and manufacturing sites by utilizing the transportation management services of FDX. Unisys employees simply call a toll-free number staffed by Caliber Logistics. Caliber distribution experts rely on FedEx, RPS, Roberts Express, and Viking Freight to ship everything from critical replacement parts to Unisys enterprise servers directly to the customer site. Each shipping decision reﬂects the most appropriate and cost-effective delivery solution. Now that computes. P 1 2 CAPTURE THE MOMENTS ART LEATHER When supplying 25,000 professional photographers with custom handmade photo albums, every- thing has to be picture perfect from order through delivery. So Art Leather, the world’s largest manufacturer of albums, folios and frames for professional photographers, and its partner, Gross National Products, offer customers a choice of FDX services to meet their deadlines and budgets: FedEx express services or RPS ground small-package delivery services. And the sky is no limit. Russian and U.S. commanders of the Mir Space Station recently exchanged commemorative Art Leather albums. This year, FedEx and RPS will deliver more than 200,000 Art Leather ship- ments, each one a thing memories are made of. P 1 3 SHOP FOR VALUE STAGE STORES INC. Challenged with opening one new department store a week, Stage Stores didn't have to shop long before selecting FDX as its distribution ally. Every day, RPS delivers up to 13,000 cartons of popular name- brand merchandise – from Levi Strauss to Liz Claiborne – to 630 stores trade-named Stage, Bealls and Palais Royal. Stage Stores relies on RPS as the distribution arm of its state-of-the-art inventory tracking system, which identiﬁes and transfers slow-moving items and keeps staple merchandise in stock. Store advertising, payroll and other time- sensitive corporate shipments are delivered via FedEx. In other words, for one-stop shipping, Stage Stores shops FDX. P 1 4 P 1 5 DELIVER THE GOODS INGRAM MICRO INC. Ingram Micro, the largest worldwide distributor of computer technology products and services, is legendary for its commitment to same-day shipping of orders received by 5 p.m. When customers have some time to spare, RPS delivers a growing number of those shipments. For more time-sensitive deliveries, Ingram Micro did itself – and its customers – one better, locating its national distribution facility just minutes from the FedEx SuperHub in Memphis, Tennessee. By leveraging late-night cutoff times for next-day and two-day delivery, Ingram Micro cuts as much as a day off its order cycle time. When delivering the goods is your business, that’s time well spent. P 1 6 FDX COMPANIES AT A GLANCE FDX is a unique holding company that provides strategic direction for FedEx and the Caliber companies. A $16 billion global transportation and logistics enterprise, FDX offers customers “total one-stop shopping” for solutions at all levels of the supply chain. Services offered by FDX companies include worldwide express delivery, ground small-package delivery, less-than-truckload freight delivery, and global logistics and electronic commerce solutions. FedEx, the world leader in global express distribution, offering time-certain delivery within 24 to 48 hours among markets that comprise more than 90 percent of the world’s gross domestic product. RPS, North America’s second-largest provider of business-to-business ground small-package delivery. Employees and Contractors:190,000 Headquarters: Memphis, Tennessee Stock Symbol: FDX Online: www.fdxcorp.com Roberts Express, the world’s leading surface- expedited carrier for nonstop, time-critical and special-handling shipments. Caliber Logistics, a pioneer in providing customized, integrated logistics and warehousing solu- tions worldwide. Viking Freight, the foremost less-than-truckload freight carrier in the western United States. Mission and Values FDX will produce superior ﬁnancial returns for its stockholders by providing high value-added logistics, transportation and related information services through focused operating companies. Customer require- ments will be met in the highest quality manner appropriate to each market segment served. FDX will strive to develop mutually rewarding relationships with its employees, partners and suppliers. Safety will be the ﬁrst consider- ation in all operations. Corporate activities will be conducted to the highest ethical and professional standards. P 1 7 HIGHLIGHTS OF THE YEAR The formation of FDX frees its member companies to focus on what they do best. In the case of FedEx, that is to provide the industry’s ﬁnest express-delivery services, just as it has for 25 years. Whether it’s rushing a drill bit to a Venezuelan oil ﬁeld, moving semiconductors just-in-time between Asia and the United States, or delivering chemotherapy treatments to a hospital in Europe, FDX customers rely on FedEx for fast, dependable, time-speciﬁc delivery of high-value goods to more than 210 countries. With the world’s most advanced express-distribution network, and information systems that allow shippers and their customers global visibility of shipment status, FedEx and its 144,000 employees deliver more than 3 million boxes, documents and pallets each business day. + + + + + + + + + A CELEBRATION OF (cid:108) To reduce transit times Osaka, Japan, with the INNOVATION along a route that links FedEx SuperHub in Fiscal year 1998 marked Federal Express Corporation’s 25th anniversary, and with it the latest in a string of serv- ice and technology innova- tions that have made – and kept – FedEx the industry leader since 1973. North America, Europe, Memphis. The ﬂight makes the Middle East, India and possible unprecedented Asia, a new around-the- next-business-day delivery by world ﬂight was launched in 10:30 a.m. – backed by the September 1997. (cid:108) To expand customers’ FedEx Money-Back Guarantee – from key mar- options for delivering heavy kets in Asia to thousands of freight, FedEx introduced U.S. cities, major Canadian FedEx International markets and Mexico City. Despite Asia’s current ﬁnan- Economy® Freight, providing cial situation, FedEx stuck by time-speciﬁc delivery (typi- SERVICE EXCELLENCE its long-term strategy of cally within ﬁve business Even as it expanded the improving global connectivity days) for heavy, skidded ship- reach of its network, FedEx for FDX customers by reﬁn- ing and strategically expand- ments up to 1,500 lbs. (cid:108) To enhance global connec- continued to enhance the convenience and quality of ing FedEx’s worldwide tivity with Asia, FedEx added its service. network. Examples include: a nonstop daily ﬂight with overnight service linking During an August 1997 strike by UPS employees, P 1 8 HIGHLIGHTS OF THE YEAR + =FREEDOM TO FOCUS =FREEDOM TO FOCUS which caused FedEx, RPS period, FedEx paid a These service innovations, and other carriers to experi- $25 million Special Appre- plus the brand respect FedEx ence unusually high ship- ciation Bonus to nearly has earned among express ment volumes, FedEx 90,000 U.S. employees. shippers worldwide, helped employees earned system- wide ISO 9001 recertiﬁca- tion while handling 30 percent more volume than normal. To recognize FedEx’s most treasured asset – its people – for their absolute dedication to customer ser- vice during this challenging Online, FedEx continued to set the customer-service pace, unveiling an upgrade to its FedEx interNetShipSM FedEx generate revenues of more than $13 billion, a 15 percent increase over ﬁscal year 1997. shipment processing capa- As the largest subsidiary in bility, and redesigning its the FDX family, FedEx acclaimed Web site remains superbly positioned (www.fedex.com) to improve to propel FDX to new levels access and functionality for of growth and proﬁtability. global customers. P 1 9 HIGHLIGHTS OF THE YEAR For RPS, Inc., the FDX family of companies represents an ideal competitive enhancement to its current market position. RPS is North America’s second-largest provider of ground small-package delivery, with service available to 28 European countries and Puerto Rico. Having responded to competitive pressure to add express to its service mix by joining FDX, RPS now can concentrate on strategically expanding its core capability – delivering business-to-business packages at rates and service levels that make it the price-value leader in its market. =A $16 BILLION =A $16 BILLION customers and streamlines RPS, like its sister company, FedEx, is an industry leader the daily handling of more in on-time performance. In than 1.3 million packages. early 1998, RPS enhanced In the past year alone, for its deserved reputation example, the company for reliability by an- added multiple-carrier nouncing a money-back shipment tracing and proof- guarantee on all of-delivery signature func- business-to-business tionality to its Web site ground deliveries within (www.shiprps.com), making the continental United it an even more customer- States, beginning in July. useful shipping tool. RPS also is a pioneer in RPS’s value to FDX cus- applying shipping-automation tomers is reﬂected in technology, which beneﬁts continued double-digit growth in revenue and package volume. HIGHLIGHTS OF THE YEAR As the premier brand name in less-than-truckload (LTL) freight movements throughout the western United States, Viking Freight, Inc. adds yet another important service to the diverse portfolio that FDX offers its customers. With next- and second- two customer advisory Viking’s commitment to business-day regional freight boards – one for corporate superior service has not service, plus direct ocean accounts, the other for gone unnoticed. In 1997, for service to Alaska and smaller shippers – to better the third time, the National Hawaii, Viking’s 4,700 anticipate and meet cus- Small Shipments Trafﬁc employees handle approxi- tomers’ needs. Viking has Conference (NASSTRAC) mately 12,000 shipments enhanced its customer ser- named Viking its regional LTL per day, achieving on-time vice and today responds to carrier of the year. Readers delivery on more than most inquiries within sec- of Logistics Management 99 percent of all shipments. onds. Viking’s Web site and Distribution magazine Consistent with its “Easy To Do Business With” philoso- phy, Viking recently created (www.vikingfreight.com), voted Viking “Quality Carrier” lets customers conduct busi- for 1998, the seventh ness electronically with con- year Viking has received venience and conﬁdence. this award. POWERHOUSE POWERHOUSE + + + + + + P 2 1 HIGHLIGHTS OF THE YEAR Nearly 1,000 times each business day, Roberts Express, Inc. engineers and executes time- speciﬁc, door-to-door surface and air-charter delivery solutions that solve special-handling challenges for FDX customers within North America and Europe. How special? Consider the 60-ton stamping press Roberts recently delivered from Brescia, Italy, to Kokomo, Indiana. The largest shipment ever handled by Roberts, the press was delivered quickly and on time, keeping an automaker’s assembly plant up and running at peak efﬁciency and quality levels. + + + With 2,000 employees and mind, even in the most time- the system lets dispatchers owner-operators, Roberts is critical situations. evaluate at least 20 load and the world’s largest surface- expedited carrier. For ship- pers and their customers, Roberts’ service guarantee and exceptional on-time per- formance deliver peace of To promote ever higher levels of productivity and service, Roberts recently installed a dynamic vehicle allocation system. As cus- tomer orders are received, trafﬁc variables to help ensure that delivery vehicles are where they need to be, when they need to be, for optimum customer service and ﬂeet utilization. P 2 2 HIGHLIGHTS OF THE YEAR From order-fulﬁllment systems to warehousing solutions, Caliber Logistics, Inc. develops and implements customized logistics solutions that help FDX customers manage costs, improve cus- tomer service and focus on their core business activities. With 3,500 employees and owner-operators worldwide, Caliber Logistics manages logistics for more than 100 FDX customer locations. It handles more than 3 million shipments per year and operates more than 6 million square feet of contract warehouse space. =SHARED STRENGTHS =SHARED STRENGTHS From its base of operations controlled, opportunistic in the United States and expansion by initiating opera- Canada, Caliber Logistics tions in Mexico and Asia. launched European opera- tions in the Netherlands in 1996. Since then, new oper- ations in Belgium, Northern Ireland and Scotland have propelled European rev- enues to nearly 10 percent of the company’s annual total. During the second half of 1998, the company expects to continue its To help customers manage logistics activities and infor- mation seamlessly across international borders, the company is deploying unique transportation management software. When installed, initially in the United States and Europe, it will make Caliber the ﬁrst logistics sup- plier to offer customers a single transportation- management interface on both sides of the Atlantic. P 2 3 MESSAGE FROM THE CHIEF FINANCIAL OFFICER The birth of FDX Corporation illustrates the ﬁnancial synergies that can result when two complementary organizations combine strengths under a shared vision. The acquisition of Caliber System, Inc. by FedEx – a “pooling of interests” transaction – was accretive to FedEx earnings in ﬁscal year 1998. The transaction included no goodwill charges, produced a tax-free exchange of shares for Caliber stockholders, and left the FDX balance sheet in robust health. FINANCIAL SECTION Stockholders can expect to We will manage the busi- While the birth of FDX was a beneﬁt from growth trends ness as a portfolio. As a unique event in the trans- driving the multiple market result, decisions on capital portation industry, ﬁscal niches now served by FDX. investment, expansion of our year 1998 was, in many For each one of the FDX delivery and information ways, another step on a con- companies, we will focus on technology networks, and tinuum of excellence – that making appropriate service additions or is, a continuation of the investments in the technol- enhancements will be based ﬁnancial performance, ser- ogy and transportation on achieving the highest vice and technology innova- assets necessary to opti- overall return on capital. In tion, and global leadership mize our enhanced proﬁt addition, our collaborative FedEx stockholders have position in terms of earnings selling process will increase grown to expect. performance and cash revenues for the operating ﬂow. Our strict yield manage- companies through a tar- ment programs will geted program focusing on continue to support proﬁt- high-yielding business. able volume growth. Alan B. Graf, Jr. Executive Vice President and Chief Financial Ofﬁcer (1) Earnings Per Share assumes dilution and excludes non-recurring items. See footnote (1) on page 25. $15.9 $14.3 97 98 REVENUES (in billions) $3.91 $2.53 97 98 (1) EARNINGS PER SHARE 33.3% 29.3% 97 98 DEBT TO TOTAL CAPITALIZATION P 2 4 F I N A N C I A L H I G H L I G H T S O N A L I K E - C A L E N D A R B A S I S In thousands, except earnings per share and Other Operating Data OPERATING RESULTS Revenues Operating income Income from continuing operations before income taxes Net income Net income, excluding non-recurring items (1) Earnings per share, assuming dilution Earnings per share, excluding non-recurring items, assuming dilution (1) Average common and common equivalent shares FINANCIAL POSITION Property and equipment, net Total assets Long-term debt, less current portion Common stockholders’ investment OTHER OPERATING DATA FedEx Express package: Average daily package volume Average pounds per package Average revenue per pound Average revenue per package Airfreight: Average daily pounds Average revenue per pound Operating weekdays Aircraft ﬂeet RPS Average daily package volume Average revenue per package Operating weekdays Viking Shipments per day Average revenue per hundredweight Operating weekdays Average number of employees (based on a standard full-time workweek) 1998 1997 Percent Change $15,872,810 $14,265,288 1,010,660 899,518 503,030 582,723 3.37 3.91 149,204 $ $ 425,369 343,865 141,276 372,752 .96 2.53 147,144 $ $ $ 5,935,050 $ 5,460,293 9,686,060 1,385,180 3,961,230 9,008,816 1,597,954 3,448,095 3,025,999 2,715,894 8.5 1.84 15.69 2,769,922 .85 254 613 $ $ $ 7.2 2.11 15.11 2,542,226 .94 254 584 1,326,190 1,121,380 5.04 256 13,287 9.28 256 $ $ 4.93 257 30,771 9.08 257 $ $ $ $ $ + 11 +138 +162 +256 + 56 +251 + 55 + 1 + + 9 8 – 13 + 15 + 11 + 18 – 13 + + 4 9 – 10 + 18 + 2 – 57 + 2 150,823 145,721 + 4 The information presented on page 24 and the table above compare the results for ﬁscal 1998 to 1997 as if Caliber System, Inc.’s prior year had ended May 24, 1997 and had included unaudited results from May 19, 1996 to May 24, 1997. However, the 1997 information discussed in the accompanying Management’s Discussion and Analysis of Results of Operations and Financial Condition and the 1997 amounts presented in the accompanying consolidated ﬁnancial statements are based on Caliber System, Inc.’s audited prior ﬁscal year ended December 31, 1996. (1) Non-recurring items include a charge of $88 million ($80 million, net of tax, or $.54 per share, assuming dilution) in 1998 related to the acquisition of Caliber System, Inc., and charges of $310 million ($231 million, net of tax, or $1.57 per share, assuming dilution) in 1997 related to the restructuring of Viking Freight, Inc.’s operations. FDX CORPORATION P 2 5 F I N A N C I A L H I G H L I G H T S Years ended May 31 In thousands, except earnings per share and Other Operating Data OPERATING RESULTS Revenues Operating income Income from continuing operations before income taxes Net income Earnings per share, assuming dilution Average common and common equivalent shares FINANCIAL POSITION Property and equipment, net Total assets Long-term debt, less current portion Common stockholders’ investment OTHER OPERATING DATA FedEx Express package: Average daily package volume Average pounds per package Average revenue per pound Average revenue per package Airfreight: Average daily pounds Average revenue per pound Operating weekdays Aircraft ﬂeet RPS Average daily package volume Average revenue per package Operating weekdays Viking Shipments per day Average revenue per hundredweight Operating weekdays Average number of employees (based on a standard full-time workweek) 1998 1997 Percent Change $15,872,810 $14,237,892 1,010,660 899,518 503,030 507,002 425,865 196,104 $ 3.37 $ 1.33 149,204 147,228 $ 5,935,050 $ 5,470,399 9,686,060 1,385,180 3,961,230 9,044,316 1,597,954 3,501,161 3,025,999 2,715,894 8.5 1.84 15.69 2,769,922 .85 254 613 $ $ $ 7.2 2.11 15.11 2,542,226 .94 254 584 1,326,190 1,067,104 5.04 256 13,287 9.28 256 $ $ 4.96 254 33,294 9.04 254 $ $ $ $ $ + 11 + 99 +111 +157 +153 + 1 + + 8 7 – 13 + 13 + 11 + 18 – 13 + + 4 9 – 10 + 24 + 2 – 60 + 3 150,823 145,995 + 3 See Note 1 to Notes to Consolidated Financial Statements for a discussion of the periods presented. P 2 6 FDX CORPORATION M A N A G E M E N T (cid:213) S D I S C U S S I O N A N D A N A L Y S I S O F R E S U LT S O F O P E R A T I O N S A N D F I N A N C I A L C O N D I T I O N 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 (together with its subsidiaries, the “Com- pany”). 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 Com- pany’s common stock. There were approximately 146,800,000 of $.10 par value shares so issued or con- verted. The accompanying ﬁnancial statements have been restated to include the ﬁnancial position and results of oper- ations for both FedEx and Caliber for all periods presented. Caliber operated on a 13 four-week period calendar end- ing December 31 with 12 weeks in each of the ﬁrst three quarters and 16 weeks in the fourth quarter. FedEx’s ﬁscal year ending May 31 consists of four, three- month quarters. The accompanying consolidated results of operations and cash ﬂows and the following ﬁnancial and statistical information for the year ended May 31, 1998 combine Caliber’s 53-week period from May 25, 1997 to May 31, 1998 with FedEx’s year ended May 31, 1998. The Company’s consolidated ﬁnancial position as of May 31, 1998 consists of Cal- iber’s ﬁnancial position as of May 31, 1998 consolidated with FedEx’s ﬁnancial position as of May 31, 1998. The accompanying consolidated results of operations and cash ﬂows and the following ﬁnancial and statistical information for the years ended May 31, 1997 and 1996 combine Caliber’s 52 weeks ended December 31, 1996 and 1995, respectively, with FedEx’s years ended May 31, 1997 and 1996, respectively. The Com- pany’s consolidated ﬁnancial position as of May 31, 1997 consists of Caliber’s financial position as of December 31, 1996 consolidated with FedEx’s ﬁnancial position as of May 31, 1997. Due to the different ﬁscal year ends, Caliber’s results of operations for the period January 1, 1997 to May 24, 1997 do not appear in the Consolidated Statements of Income and instead are recorded as a direct adjust- ment to equity. Caliber’s revenues, operating expenses and net loss for this period were $1.0 billion, $1.1 billion and $41 million, respectively. Included in expenses for this period was an $85 million pre-tax charge ($56 mil- lion, net of tax) related to the restructuring of Viking Freight, Inc. (“Viking”), Caliber’s regional freight carrier (discussed below). RESULTS OF OPERATIONS Consolidated net income for 1998 was $503 million ($3.37 per share, assuming dilution) compared with $196 million ($1.33 per share, assuming dilution) and $281million ($1.92 per share, assuming dilution) for 1997 and 1996, respectively. Current year results reﬂect strong domestic package volume growth and slightly improving revenue per package (yield) at both FedEx and RPS, Inc. (“RPS”) and significant improvements in Viking’s operations. FedEx’s net income for 1998 was $421 million com- pared with $361 million and $308 million for 1997 and 1996, respectively. Year-over-year improvements in FedEx’s consolidated results for the past three years reﬂect double-digit growth of its express delivery pack- age volume and slight improvements in U.S. domestic yield. In 1998, U.S. domestic margins improved as yields increased at a higher rate than cost per package. However, international margins declined in the face of diminished airfreight revenues, foreign currency ﬂuctua- tions and rising expenses. From continuing operations, Caliber recorded income of $78 million for 1998, a loss of $165 million for 1997 and income of $92 million for 1996. The current year income is attributable to strong volume growth and increased yields at RPS, Caliber’s ground small-package carrier, and improved operations at Viking since its restructuring in March 1997 (discussed below). Exclud- ing impairment charges related to the Viking restructur- ing, Caliber recorded net income of $10 million in 1997. Non-recurring Items Results of operations included various non-recurring items which affected reported earnings for 1998 and 1997 as discussed below. Current year results included $88 million ($80 million, net of tax) of expenses related to the acquisition of Cal- iber and the formation of the Company. These expenses were primarily investment banking fees and payments to members of Caliber’s management in accordance with pre-existing management retention agreements. Exclud- ing these expenses, consolidated net income for 1998 was $583 million, or $3.91 per share, assuming dilu- tion. Also in the current year, Viking recognized a $16 million gain from assets sold in its restructuring, which was announced by Caliber on March 27, 1997. Under the restructuring plan, operations at Viking’s midwestern, eastern and northeastern divisions ceased on March 27, 1997, and Viking’s southwestern division operated through June 1997 and was subsequently sold. Viking continues to operate in the western United States where it has been a leader in the regional less-than- truckload market for many years. In connection with the restructuring, Caliber recorded a non-cash asset impairment charge of $225 million ($175 million, net of tax) in December 1996 and an $85 million restructur- ing charge in March 1997. Excluding the net effect of the December 1996 charge, consolidated net income FDX CORPORATION P 2 7 M A N A G E M E N T (cid:213) S D I S C U S S I O N A N D A N A L Y S I S for 1997 was $371 million, or $2.52 per share, assuming dilution. In addition, Caliber recorded in 1998 approximately $5 million of income, net of tax, from discontinued oper- ations related to the exiting of the airfreight business served by Roadway Global Air, Inc. in 1995. A significant non-recurring item impacting 1998’s results of operations was 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 approxi- mately 300,000 additional packages per day. While it is difﬁcult to estimate with precision the impact of this additional volume, FedEx and RPS have retained a por- tion of this volume. The Company analytically calculated that the volume not retained at the end of the ﬁrst quar- ter contributed approximately $170 million in revenues to that quarter. This additional revenue, net of applicable variable compensation, income taxes and variable costs, but not allocated ﬁxed costs, resulted in approxi- mately $.25 additional earnings per share, assuming dilution, to the consolidated ﬁrst quarter’s earnings. FedEx recorded two aircraft-related items in the current year. FedEx realized a net gain of $17 million from the insurance settlement and the release from certain related liabilities on a leased MD11 aircraft destroyed in an accident in July 1997. This gain was recorded in operating and non-operating income in substantially equal amounts. An unrelated expense, which partially offset this gain, was an addition of $9 million to an oper- ating reserve for the disposition of leased B747 air- craft. In recording the additional reserve, maintenance and repairs and rentals and landing fees expenses were increased. These aircraft, which were subleased, underwent certain maintenance and repairs before being transferred to a new lessee. The net effect of the MD11 gain and the B747 reserve on FedEx’s domestic and international operating income was immaterial. The combined effect of these aircraft-related items con- tributed approximately $.03 per share in the ﬁrst quar- ter of 1998, net of applicable variable compensation and income taxes. FedEx’s 1997 results included a $15 million pre- tax beneﬁt to operating income from the settlement of a Tennessee personal property tax matter and a $17 million gain in non-operating income from an insur- ance settlement for a DC10 destroyed by ﬁre in Sep- tember 1996. In 1998, FedEx’s U.S. domestic package volumes increased on a year-over-year basis primarily due to Revenues The following table shows a comparison of revenues for the years ended May 31: In millions FedEx: U.S. domestic express International Priority (IP) International Express Freight (IXF) and Airport-to-Airport (ATA) FedEx Air Charter Logistics services Other(1) Caliber: RPS Viking Other 1998 1997 1996 1998/1997 1997/1996 Percent Change $ 9,326 $ 8,073 $ 7,284 2,731 2,351 1,997 598 88 99 413 605 72 99 320 554 92 94 253 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 13,255 11,520 10,274 1,710 382 526 1,344 966 408 1,293 834 321 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $15,873 $14,238 $12,722 +16 +16 – 1 +21 — +29 +15 +27 –60 +29 +11 +11 +18 + 9 –22 + 5 +27 +12 + 4 +16 +27 +12 (1)Includes the sale of engine noise reduction kits. P 2 8 FDX CORPORATION The following table shows a comparison of selected shipment statistics for the years ended May 31: In thousands, except dollar amounts Percent Change 1998 1997 1996 1998/1997 1997/1996 FedEx: U.S. domestic express: Average daily packages Revenue per package IP: Average daily packages Revenue per package IXF/ATA: Average daily pounds Revenue per pound Caliber: RPS: 2,767 $13.27 259 $41.45 2,770 $ .85 2,490 $12.77 226 $40.91 2,542 $ .94 2,246 $12.67 192 $40.58 2,144 $ 1.01 Average daily packages Revenue per package 1,326 $ 5.04 1,067 $ 4.96 1,043 $ 4.92 Viking: Shipments per day Revenue per hundredweight 13.3 $ 9.28 33.3 $ 9.04 31.3 $ 8.07 +11 + 4 +15 + 1 + 9 –10 +24 + 2 –60 + 3 +11 + 1 +18 + 1 +19 – 7 + 2 + 1 + 6 +12 rapid growth of its deferred services, including FedEx Express Saver. This growth was augmented by incre- mental UPS strike-related volume, the majority of which was in the deferred service category. Excluding the effects of a temporary 2% fuel surcharge and the expi- ration of the air cargo transportation tax on 1997 yields, FedEx U.S. domestic yields rose 5% in 1998 as a result of continuing yield-management actions. These actions included pursuing price increases on low-yielding accounts, discontinuing unproﬁtable accounts, increas- ing average weight per package and implementing a 3% to 4% price increase targeted to list price and standard discount matrix customers for U.S. domestic shipments effective February 15, 1998. The expiration of the air cargo transportation excise tax added approximately $50 million to U.S. domestic rev- enues and 1% to U.S. domestic yields in both 1997 and 1996. The tax expired on December 31, 1995, was reenacted by Congress effective August 27, 1996, and expired again on December 31, 1996. FedEx was not obligated to pay the tax during the periods in which it was expired. The excise tax was reenacted by Congress effective March 7, 1997, and, in August 1997, it was extended for 10 years through September 30, 2007. FedEx’s IP service continued to experience double-digit growth in average daily volumes and revenues, with yields remaining relatively constant. Current year volume growth slowed to 15% year-over-year, primarily due to weakness in Asian markets. In 1998 and 1997, FedEx’s international non-express air- freight revenues were a signiﬁcant factor in determining international proﬁtability. FedEx uses ATA airfreight ser- vice (a lower-priced, space-available service) to ﬁll space on international ﬂights not used by express services such as IP or IXF. In 1998, weakness in Asian economies and continued downward pressure on yields resulted in lower non-express airfreight prices and revenues than in 1997. In 1997, airfreight revenues increased year-over- year, due to FedEx’s expansion in international markets, despite excess market capacity and downward pressure on yields. The increases in FedEx’s other revenue in 1998 and 1997 were primarily attributable to increased sales of engine noise reduction kits. RPS’s revenue per day increased 26% and 3% in 1998 and 1997, respectively, primarily due to increased aver- age daily volume of 24% and 2% in these same years. Over the same periods, RPS’s yield remained stable, and effective February 9, 1998, management imple- mented a 3.7% rate increase at RPS. On a daily basis, Viking’s revenue declined 61% year- over-year in 1998 and increased 15% in 1997. As a result of Viking’s restructuring in March 1997, in which operations at four of ﬁve divisions were terminated by June 1997, Viking’s daily shipments declined 60% year- over-year in 1998. FDX CORPORATION P 2 9 M A N A G E M E N T (cid:213) S D I S C U S S I O N A N D A N A L Y S I S Operating Expenses Volume growth and expansion of the Company’s opera- tions resulted in a trend of rising operating expenses. Presented below are year-over-year percentage changes in selected operating expenses: Percent Change 1998/1997 1997/1996 Salaries and employee beneﬁts Purchased transportation Rentals and landing fees Depreciation and amortization Maintenance and repairs Fuel Other Total operating expenses + 8 +18 +14 + 4 +13 – 1 +11 + 8 +11 +18 +12 + 9 +14 +20 +17 +15 Salaries and employee beneﬁts expense rose primarily due to higher employment levels associated with volume growth, partially offset in 1998 by a decline at Viking after its restructuring. Increased provisions under the Company’s performance-based, incentive compensation plans in 1998 and 1997, and a $25 million special appreciation bonus in 1998 for U.S. operations employ- ees at FedEx for their extra efforts during the UPS strike also contributed to the increases in salaries and employee beneﬁts expense. Increases in purchased transportation were primarily volume related, with the majority of the increases occur- ring at RPS in 1998 and at FedEx in 1997. Rentals and landing fees increased primarily due to addi- tional aircraft leased by FedEx. As of May 31, 1998, the Company had 86 wide-bodied aircraft under operating lease compared with 78 as of May 31, 1997, and 74 as of May 31, 1996. Management expects year-over-year increases in lease expense to continue as the Company enters into additional aircraft rental agreements during 1999 and thereafter. In the past three years, FedEx’s aircraft fleet has increased resulting in a corresponding rise in mainte- nance expense. The rise in maintenance and repairs expense for 1998 was primarily due to higher engine maintenance expense on B727, DC10 and A310 air- craft. As discussed above, most of the 1998 increase in an operating reserve for the disposition of B747 air- craft was recorded as maintenance and repairs expense. In 1997, FedEx experienced higher engine maintenance expense on MD11 and A310 aircraft. FedEx expects a predictable pattern of aircraft mainte- nance and repairs expense. However, unanticipated maintenance events will occasionally disrupt this pat- tern, resulting in periodic ﬂuctuations in maintenance and repairs expense. Given FedEx’s increasing ﬂeet size, aging ﬂeet and variety of aircraft types, management believes that maintenance and repairs expense will con- tinue a trend of year-over-year increases for the fore- seeable future. P 3 0 FDX CORPORATION Fuel expense decreased in 1998 due to a 10% decline in average jet fuel price per gallon and a decrease in vehicle fuel consumption at Viking, partially offset by a 13% increase in jet fuel gallons consumed. Fuel expense increased in 1997due to a 12% and 8% rise in average jet fuel price per gallon and gallons consumed, respec- tively. In 1997, the increase in average price per gallon of jet fuel was due to higher jet fuel prices and a 4.3 cents per gallon excise tax on aviation fuel, used domestically, which became effective October 1, 1995. For the past three years, fuel expense included amounts received and paid by FedEx under contracts which are designed to limit FedEx’s exposure to ﬂuctuations in jet fuel prices. In order to mitigate the impact of the increase in jet fuel prices experienced in 1997, FedEx implemented fuel sur- charges on airfreight shipments, effective December 1, 1996, for shipments out of Europe and selected Asian countries. Additionally, the Company implemented fuel sur- charges, effective December 15, 1996, for airfreight ship- ments originating in the United States, Latin America and the remaining parts of Asia, except those to the People’s Republic of China and Hong Kong. These surcharges were discontinued effective April 15 or June 1, 1997, depending on the origin country. FedEx also implemented a tempo- rary 2% fuel surcharge, effective February 3, 1997, on U.S. domestic shipments except FedEx Same Day service and including Puerto Rico. This surcharge also applied to all U.S. export IP shipments, except those to the People’s Republic of China and Hong Kong. This surcharge was lifted on August 1, 1997. Increases in other operating expenses for 1998 and 1997 were primarily due to expenses related to volume growth and, in 1998, expenses necessitated by additional volume during the UPS strike, including temporary manpower and uniforms and supplies. The cost of sales of engine noise reduction kits also increased in 1998 and 1997. The Company’s work on the Year 2000 (“Y2K”) com- puter compliance issue began in 1996. The Company’s Y2K compliance program consists of ﬁve parts: inven- tory, assessment, renovation, testing and implementa- tion. The Company has conducted an inventory and assessment of remediation required for business- critical information technology applications. Project plans have been created, and progress is being moni- tored on an ongoing basis. Upon completion, validation of these efforts will be performed by an internal, inde- pendent process. The Company’s goal is to have the majority of these business-critical information technol- ogy applications Y2K compliant by December 31, 1998. The Company is also in the process of complet- ing Company-wide inventory, assessment and remedia- tion project plans for business-critical personal computers and software, user applications and embedded- chip systems. The Company’s goal is to have the major- ity of these business-critical components Y2K compliant by May 31, 1999. The Company is investigating the Y2K compliance sta- tus of its vendors, suppliers and afﬁliates via the Com- pany’s own internal vendor compliance effort. The Company will carry out this task through a Company- wide effort, assisted by consultants, to address internal issues, and jointly with industry trade groups, to address issues related to third parties which are com- mon to transportation companies. The Company has incurred approximately $50 million to date, including consulting fees, internal staff costs and other expenses. The Company expects to incur addi- tional expenses of approximately $100 million in the next two years to be Y2K compliant. While the Company believes it is taking all appropriate steps to achieve Y2K compliance, its Y2K issues and any potential future business interruptions, costs, damages or losses related thereto, are dependent, to a signiﬁcant degree, upon the Y2K compliance of third parties, both domestic and international, such as government agencies, customers, vendors and suppliers. The Y2K problem is pervasive and complex, as virtually every computer opera- tion will be affected in some way. Consequently, no assur- ance can be given that Y2K compliance can be achieved without signiﬁcant additional costs. Operating Income The Company ’s consolidated operating income increased 99% in 1998 and decreased 35% in 1997. Operating income for 1998 beneﬁted from the effect of the UPS strike; whereas, operating income for 1997 was reduced by the Viking asset impairment charge of $225 million. FedEx’s consolidated operating income increased 20% and 12% in 1998 and 1997, respectively. FedEx’s U.S. domestic operating income rose 35% and 3% in 1998 and 1997, respectively. In 1998, operating income improved primarily due to increases in revenue per package (3.9%) exceeding increases in cost per package (2.9%) and due to a rise in average daily vol- ume (11%). Also, as noted above, 1998 U.S. domestic operating results were signiﬁcantly impacted by the UPS strike. Sales of engine noise reduction kits con- tributed $127 million, $87 million and $63 million to FedEx’s U.S. domestic operating income in 1998, 1997 and 1996, respectively. In 1997, domestic operating income included a $15 million pre-tax beneﬁt from the settlement of a Tennessee personal property tax mat- ter. Increases in cost per package (1.4%) exceeded increases in revenue per package (0.8%), while aver- age daily volume rose 11%. U.S. domestic operating margins were 7.8%, 6.7% and 7.3% in 1998, 1997 and 1996, respectively. International operating income declined $57 million in 1998, compared with a $59 million increase in 1997. International operating results declined in 1998 as a result of slower growth of IP and IXF volumes during a period of international network expansion. Lower air- freight yields, higher salaries and employee beneﬁts and aircraft lease expense, additional start-up costs for sev- eral new international ﬂights and the net effect of foreign currency ﬂuctuations negatively impacted international results. The increase in operating income in 1997 was attributable to strong growth in the Company’s IP volumes and airfreight pounds, partially offset by lower airfreight yields. International operating margins were 2.3%, 4.4% and 2.9% in 1998,1997 and 1996, respectively. RPS reported operating income of $172 million, $136 million and $174 million for 1998, 1997 and 1996, respectively. The increase in operating income for 1998 resulted from package volume growth and the positive effect of the 12-day UPS strike. In 1997, despite a 4% increase in revenues, higher ﬁxed costs of RPS’s contin- uing expansion and investment in technology and equip- ment contributed to the decline in operating results. Operating margins were 10.1%, 10.1% and 13.4% in 1998, 1997 and 1996, respectively. Viking reported operating income of $28 million in 1998, an operating loss of $362 million in 1997 and an operating loss of $40 million in 1996. As discussed above, operating results for 1998 include a $16 million gain on the sale of certain Viking assets, and results for 1997 include a $225 million asset impairment charge. Operating margins were 7.3%, (37.5%) and (4.8%) in 1998, 1997 and 1996, respectively. For additional information on the Company’s business segments, see Note 12 of Notes to Consolidated Financial Statements. Other Income and Expense and Income Taxes Net interest expense increased 19% for 1998, primar- ily due to lower levels of capitalized interest at both FedEx and Caliber. Interest is capitalized during the modiﬁcation of certain MD11 and DC10 aircraft from passenger to freighter conﬁguration, among other pro- jects. For 1997, net interest expense increased 16% due to higher debt levels at Caliber and the loss of interest income from discontinued operations, partially offset by lower effective interest rates at FedEx. The level of capitalized interest in 1997 was comparable to that of 1996. Other, net for 1998 included a gain from an insurance settlement for an MD11 aircraft destroyed in an acci- dent in July 1997. Other, net for 1997 included a $17 million gain from an insurance settlement for a DC10 aircraft destroyed by ﬁre in September 1996. The Company’s effective tax rate was 44.6% in 1998, 53.9% in 1997 and 43.0% in 1996. Excluding non- recurring items from the Caliber acquisition in 1998 and the Viking restructuring in 1997, the effective rate would have been 41.5% in 1998 and 43.0% in 1997 and 1996. In each year, the effective tax rate (exclusive of non-recurring items) was greater than the statutory U.S. federal tax rate primarily because of state income taxes and other factors as identiﬁed in Note 9 of Notes to Consolidated Financial Statements. For 1999, management expects the effective tax rate to remain at a level similar to the 1998 rate (exclusive of non- recurring items). The actual rate, however, is depen- dent on a number of factors, including the amount and source of operating income. FDX CORPORATION P 3 1 M A N A G E M E N T (cid:213) S D I S C U S S I O N A N D A N A L Y S I S Outlook Management is committed to achieving long-term earn- ings growth by providing transportation, high value- added logistics and related information services through focused operating companies. This frequently involves a signiﬁcant front-end investment in assets, technology and personnel that may reduce near-term proﬁtability. As discussed in Revenues above, a key reason for the increase in FedEx’s U.S. domestic yield was the contin- ued yield-management actions of implementing price increases on low-yielding accounts, discontinuing unproﬁtable accounts, increasing average weight per package and implementing a 3% to 4% rate increase in February 1998. Management believes yields will con- tinue to beneﬁt from these actions in 1999, while pack- age volumes will grow at a lower rate in 1999 than in the past several years. FedEx will continue to manage yields with the goal of ensuring an appropriate balance between revenues generated and the cost of providing express services. Actual results, however, may vary depending primarily on the impact of competitive pricing changes, customer responses to yield-management ini- tiatives, changing customer demand patterns and domestic economic conditions. FedEx’s operating income from the sales of engine noise reduction kits peaked in 1998 and is expected to decline $45 million year-over-year in 1999 and to become insigniﬁcant by 2001. Actual results may differ depend- ing primarily on the impact of actions by FedEx’s com- petitors and regulatory conditions. While FedEx’s long-term strategy for international opera- tions is to improve global connectivity for its customers by strategically expanding its worldwide network, inter- national economic developments, including the current Asian economic difﬁculties, may limit short-term growth of FedEx’s international services and proﬁts. Manage- ment expects, however, strategic expansion to allow for continued, long-term growth of these services. Management expects IP average daily volume to con- tinue its strong growth in 1999, and IP yields to remain relatively constant. With respect to airfreight, manage- ment believes volumes and yields will decline year-over- year in 1999. Actual results for IP or airfreight, however, will depend on international economic condi- tions, actions by FedEx’s competitors and regulatory conditions for international aviation rights. To boost customer conﬁdence and RPS’s competitive position, RPS introduced a guaranteed ground offering in July 1998 for business-to-business shipments. Manage- ment expects RPS’s package volume to continue to grow, as projected facility expansions begin to address cur- rent capacity constraints. Yields will likely remain stable or increase slightly. Actual results, however, will depend primarily on the impact of competitive pricing changes, actions by RPS’s competitors, changing customer demand patterns and domestic economic conditions. P 3 2 FDX CORPORATION Viking’s strategy for 1999 is to maintain its market leader- ship in the western United States, improve yields and invest in updated information systems and other technologies. The Company will continue to invest in technologies that improve the efﬁciency of package pick-up, sorting, track- ing and delivery and that improve customer access and connectivity. The Company will also continue projects designed to enhance productivity and strengthen the Company’s infrastructure. Assuming effective implemen- tation, these investments are expected to reduce trans- portation cost per package. Effective June 1, 1998, the Company adopted a new accounting standard which provides guidance on accounting for the costs of software developed or obtained for internal use. This standard requires that certain of these costs be capitalized, and the Company estimates the pre-tax benefit of the adoption to be approximately $30 million for 1999. FINANCIAL CONDITION Liquidity Cash and cash equivalents totaled $230 million at May 31, 1998, an increase of $69 million during 1998 compared with an increase of $33 million in 1997 and a decrease of $244 million in 1996. Cash provided from operations during 1998 was $1.7 billion compared with $1.1 billion and $1.2 billion in 1997 and 1996, respectively. The Company currently has available a $1.0 billion revolv- ing bank credit facility that is generally used to ﬁnance tem- porary operating cash requirements and to provide support for the issuance of commercial paper. Manage- ment believes that cash ﬂow from operations, its commer- cial paper program and the revolving bank credit facility will adequately meet its working capital needs for the fore- seeable future. Capital Resources The Company’s operations are capital intensive, charac- terized by signiﬁcant investments in aircraft, vehicles, computer and telecommunication equipment, package handling facilities and sort equipment. The amount and timing of capital additions are dependent on various fac- tors including volume growth, domestic and interna- tional economic conditions, new or enhanced services, geographical expansion of services, competition and availability of satisfactory ﬁnancing. Capital expenditures for 1998 totaled $1.9 billion and included three MD11 aircraft (which were subsequently sold and leased back), four Airbus A310 aircraft, air- craft modiﬁcations, customer automation and computer equipment, facilities and vehicles and ground support equipment. In comparison, prior year expenditures totaled $1.8 billion and included ten Airbus A310 aircraft, two MD11 aircraft (which were subsequently sold and leased back, one in 1997 and one in 1998), customer automation and computer equipment and vehicles and ground support equipment. For information on the Company’s purchase commitments, see Note 14 of Notes to Consolidated Financial Statements. The Company has historically financed its capital investments through the use of lease, debt and equity ﬁnancing in addition to the use of internally generated cash from operations. Generally, management’s prac- tice in recent years with respect to funding new wide- bodied aircraft acquisitions has been to ﬁnance such aircraft through long-term lease transactions that qualify as off-balance sheet operating leases under applicable accounting rules. Management has deter- mined that these operating leases have provided eco- nomic beneﬁts favorable to ownership with respect to market values, liquidity and after-tax cash ﬂows. In the future, other forms of secured ﬁnancing may be pur- sued to finance the Company’s aircraft acquisitions when management determines that it best meets the Company’s needs. The Company has been successful in obtaining investment capital, both domestic and international, for long-term leases on terms accept- able to it although the marketplace for such capital can become restricted depending on a variety of eco- nomic factors beyond the control of the Company. See Note 4 of Notes to Consolidated Financial Statements for additional information concerning the Company’s debt and credit facilities. In July 1997, $20 million of Memphis-Shelby County Airport Authority (“MSCAA”) Special Facilities Revenue Bonds were issued. The proceeds of the bonds in combination with other funds were used to refund outstanding MSCAA 1982B bonds on September 2, 1997. Also in July 1997, FedEx issued $250 million of unsecured senior notes with a maturity date of July1, 2097, under FedEx’s July1996 shelf registration statement filed with the Securities and Exchange Commission. In June 1998, approximately $833 million of pass through certiﬁcates were issued under shelf registration state- ments ﬁled with the Securities and Exchange Commission to ﬁnance or reﬁnance the debt portion of leveraged leases related to eight Airbus A300 and ﬁve MD11 aircraft to be delivered through the summer of 1999. The pass through certiﬁcates are not direct obligations of, or guaranteed by, the Company or FedEx, but amounts payable by FedEx under the leveraged leases are sufﬁcient to pay the princi- pal of and interest on the certiﬁcates. Management believes that the capital resources avail- able to the Company provide ﬂexibility to access the most efﬁcient markets for ﬁnancing its capital acquisi- tions, including aircraft, and are adequate for the Com- pany’s future capital needs. Market Risk Sensitive Instruments and Positions The Company currently has market risk sensitive instru- ments related to interest rates. As disclosed in Note 4 of Notes to Consolidated Financial Statements, the Company has outstanding unsecured debt of $1.6 billion at May 31, 1998, of which $1.4 billion is long-term. The Company does not have signiﬁcant exposure to changing interest rates on its long-term debt because the interest rates are ﬁxed. Market risk for ﬁxed-rate long-term debt is estimated as the potential decrease in fair value resulting from a hypothetical 10% increase in interest rates and amounts to approximately $55 million as of May 31, 1998. The underlying fair values of the Company’s long-term debt were estimated based on quoted market prices or on the current rates offered for debt with similar terms and maturities. The Company does not use derivative ﬁnancial instruments to manage interest rate risk. The Company’s earnings are affected by ﬂuctuations in the value of the U.S. dollar as compared to foreign cur- rencies, as a result of transactions in foreign markets. At May 31, 1998, the result of a uniform 10% strength- ening in the value of the dollar relative to the currencies in which the Company’s transactions are denominated would result in a decrease in operating income of approximately $15 million for the year ending May 31, 1999. This calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar. In addition to the direct effects of changes in exchange rates, which are a changed dollar value of the resulting sales, changes in exchange rates also affect the volume of sales or the foreign currency sales price as competitors’ services become more or less attrac- tive. The Company’s sensitivity analysis of the effects of changes in foreign currency exchange rates does not factor in a potential change in sales levels or local cur- rency prices. In the past three years, FedEx has entered into con- tracts which are designed to limit its exposure to ﬂuc- tuations in jet fuel prices. FedEx hedges its exposure to jet fuel price market risk only on a conservative, lim- ited basis. No such contracts were outstanding as of May 31, 1998. See Note 14 of Notes to Consolidated Financial Statements for accounting policy and addi- tional information regarding jet fuel contracts. The Company does not purchase or hold any derivative ﬁnancial instruments for trading purposes. Deferred Tax Assets At May 31, 1998, the Company had a net cumula- tive deferred tax liability of $41 million consisting of $601 million of deferred tax assets and $642 million of deferred tax liabilities. The reversals of deferred tax assets in future periods will be offset by similar amounts of deferred tax liabilities. Statements in this “Management’s Discussion and Analysis of Results of Operations and Financial Condi- tion” or made by management of the Company which contain more than historical information may be consid- ered 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. FDX CORPORATION P 3 3 C O N S O L I D A T E D S T A T E M E N T S O F I N C O M E Years ended May 31 In thousands, except Earnings Per Share REVENUES Operating Expenses: Salaries and employee beneﬁts Purchased transportation Rentals and landing fees Depreciation and amortization Maintenance and repairs Fuel Merger expenses Restructuring and impairment charges Other OPERATING INCOME Other Income (Expense): Interest, net Other, net Income from Continuing Operations Before Income Taxes Provision for Income Taxes Income from Continuing Operations DISCONTINUED OPERATIONS, NET OF INCOME TAXES: Loss from discontinued operations Income (loss) from discontinuance NET INCOME EARNINGS (LOSS) PER COMMON SHARE: Continuing operations Discontinued operations EARNINGS (LOSS) PER COMMON SHARE— ASSUMING DILUTION: Continuing operations Discontinued operations 1998 1997 1996 $15,872,810 $14,237,892 $12,721,791 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 6,647,140 1,481,590 1,285,655 963,550 884,280 726,768 88,000 (16,000) 6,150,247 1,252,901 1,131,543 926,089 781,708 734,722 —- 225,036 5,557,962 1,064,925 1,014,024 851,992 686,185 612,243 — — 2,801,167 2,528,644 2,154,908 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 14,862,150 13,730,890 11,942,239 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 1,010,660 507,002 779,552 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (124,413) 13,271 (104,195) 23,058 (90,190) 12,732 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (111,142) (81,137) (77,458) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 899,518 401,363 425,865 229,761 702,094 301,908 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 498,155 196,104 400,186 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) — 4,875 — — (69,950) (49,664) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 4,875 — (119,614) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $ 503,030 $ 196,104 $ 280,572 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $ $ 3.40 .03 $ 1.35 — 2.76 (.82) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $ 3.43 $ 1.35 $ 1.94 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $ 3.34 .03 $ 1.33 $ — 2.74 (.82) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $ 3.37 $ 1.33 $ 1.92 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. P 3 4 FDX CORPORATION C O N S O L I D A T E D B A L A N C E S H E E T S May 31 In thousands ASSETS Current Assets: Cash and cash equivalents Receivables, less allowances of $61,409 and $68,130 Spare parts, supplies and fuel Deferred income taxes Prepaid expenses and other Total current assets Property and Equipment, at Cost: Flight equipment Package handling and ground support equipment and vehicles Computer and electronic equipment Other Less accumulated depreciation and amortization Net property and equipment Other Assets: Goodwill Equipment deposits and other assets Total other assets LIABILITIES AND STOCKHOLDERS’ INVESTMENT Current Liabilities: Short-term debt Current portion of long-term debt Accounts payable Accrued expenses Total current liabilities Long-Term Debt, Less Current Portion Deferred Income Taxes Other Liabilities Commitments and Contingencies (Notes 5, 14 and 15) Common Stockholders’ Investment: Common stock, $.10 par value; 400,000 shares authorized; 147,411 and 147,624 shares issued Additional paid-in capital Retained earnings Less treasury stock, at cost, and deferred compensation Total common stockholders’ investment 1998 1997 $ 229,565 $ 160,852 1,943,423 1,877,972 364,714 232,790 109,640 339,353 196,959 68,592 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 2,880,132 2,643,728 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 4,056,541 3,425,279 2,162,624 2,819,430 3,741,407 3,131,060 1,957,917 2,557,564 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 12,463,874 11,387,948 6,528,824 5,917,549 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 5,935,050 5,470,399 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 356,272 514,606 370,342 559,847 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 870,878 930,189 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $ 9,686,060 $ 9,044,316 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $ — $ 230,000 257,529 1,145,410 1,400,900 126,666 999,782 1,223,039 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 2,803,839 2,579,487 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 1,385,180 1,597,954 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 274,147 181,835 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 1,261,664 1,183,879 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 14,741 992,821 14,762 937,978 2,972,077 2,621,511 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 3,979,639 3,574,251 18,409 73,090 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 3,961,230 3,501,161 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $ 9,686,060 $ 9,044,316 The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets. FDX CORPORATION P 3 5 C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S Years ended May 31 In thousands OPERATING ACTIVITIES Income from continuing operations Adjustments to reconcile income from continuing operations to cash provided by operating activities: Depreciation and amortization Provision for uncollectible accounts Provision (beneﬁt) for deferred income taxes and other Restructuring and impairment charges Gain from disposals of property and equipment Changes in assets and liabilities, net of effects from dispositions of businesses: Increase in receivables Increase in other current assets Increase in accounts payable, accrued expenses and other liabilities Other, net Cash provided by operating activities INVESTING ACTIVITIES Purchases of property and equipment, including deposits 1998 1997 1996 $ 498,155 $ 196,104 $ 400,186 963,731 59,616 45,548 (16,000) (5,741) 928,799 40,634 (9,610) 225,036 (20,143) 857,951 38,963 34,355 — (7,040) (254,283) (102,203) (426,357) (443,799) (205,427) (65,038) 453,721 63,829 647,780 (29,266) 114,612 15,971 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 1,706,373 1,109,178 1,184,533 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) on aircraft of $70,359, $26,107 and $68,202 (1,880,173) (1,762,979) (1,700,376) Proceeds from dispositions of property and equipment: Sale-leaseback transactions Reimbursements of A300 deposits Other dispositions Net receipts from (advances to) discontinued operations Other, net Cash used in investing activities FINANCING ACTIVITIES Principal payments on debt Proceeds from debt issuances Proceeds from stock issuances Dividends paid Other, net Cash (used in) provided by ﬁnancing activities CASH AND CASH EQUIVALENTS Cash provided by (used in) continuing operations Cash used in discontinued operations Balance at beginning of year Balance at end of year 322,852 106,991 135,329 1,735 (75,964) 162,400 63,039 39,423 (2,527) 24,612 176,500 143,859 32,619 (60,000) 77,208 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (1,389,230) (1,476,032) (1,330,190) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (533,502) 267,105 33,925 (7,793) (6,939) (9,670) 433,404 31,013 (34,825) (9,741) (264,004) 214,798 36,566 (54,688) (4,898) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (247,204) 410,181 (72,226) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 69,939 (1,735) 161,361 43,327 (10,802) 128,327 (217,883) (26,118) 372,328 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $ 229,565 $ 160,852 $ 128,327 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. P 3 6 FDX CORPORATION C O N S O L I D A T E D S T A T E M E N T S O F C H A N G E S I N C O M M O N S T O C K H O L D E R S (cid:213) I N V E S T M E N T In thousands, except shares BALANCE AT MAY 31,1995 Cash dividends declared by Caliber System, Inc. Distribution of Roadway Express, Inc. Purchase of treasury stock Forfeiture of restricted stock Issuance of common and treasury stock under employee incentive plans (932,105 shares) Amortization of deferred compensation Foreign currency translation adjustment Net income BALANCE AT MAY 31,1996 Cash dividends declared by Caliber System, Inc. Purchase of treasury stock Forfeiture of restricted stock Two-for-one stock split by Issuance of common and treasury stock under employee incentive plans (1,336,116 shares) Amortization of deferred compensation Foreign currency translation adjustment Net income BALANCE AT MAY 31, 1997 Adjustment to conform Caliber System, Inc.’s ﬁscal year Cash dividends declared by Caliber System, Inc. Purchase of treasury stock Forfeiture of restricted stock Issuance of common and treasury stock under employee incentive plans Common Stock Additional Paid-in Capital Retained Earnings Treasury Deferred Stock Compensation $ 8,888 $863,035 $2,444,886 $(55,122) $ (724) — — — — 72 — — — — — — — 40,051 — — — (54,706) (199,745) — — — — (7,626) 280,572 — — (13,009) (1,068) 17,477 — — — — — — 1,130 (13,898) 2,227 — — (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 8,960 903,086 2,463,381 (51,722) (11,265) — — — — (28,184) — — — (15,057) (803) — — 720 (5,699) — — 103 34,892 — — — — — — — — (4,091) 196,104 12,100 — — — (10,484) 3,421 — — 14,762 937,978 2,621,511 (55,482) (17,608) 492 (51,795) (1,765) — (7,049) (979) — — — 586 — — — (3,899) — — — — — — — — — — Federal Express Corporation in the form of a 100% stock dividend 5,699 (1,466,895 shares) 135 54,195 Cancellation of Caliber System, Inc. 7,918 (7,204) treasury stock (156) 156 (66,474) 57,357 Amortization of deferred compensation Foreign currency translation adjustment Net income — — — — — — — (30,296) 503,030 — — — — 5,817 — — (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) BALANCE AT MAY 31,1998 $14,741 $992,821 $2,972,077 $ — $(18,409) The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. FDX CORPORATION P 3 7 N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S NOTE 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 (together with its sub- sidiaries, the “Company”). In this transaction, which was accounted for as a pooling of interests, Caliber share- holders 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 con- verted 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. 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 quar- ter. FedEx’s fiscal year ending May 31 consists of four, three-month quarters. The Company’s consoli- dated results of operations and cash flows for the year ended May 31, 1998 comprise Caliber’s 53- week period from May 25, 1997 to May 31, 1998 consolidated with FedEx’s year ended May 31, 1998. The Company’s consolidated financial position as of May 31, 1998 consists of Caliber’s financial position as of May 31, 1998 consolidated with FedEx’s finan- cial position as of May 31, 1998. The Company’s consolidated results of operations and cash flows for the years ended May 31, 1997 and 1996 com- prise Caliber’s calendar years 1996 and 1995 con- solidated with FedEx’s fiscal years 1997 and 1996. The Company’s consolidated financial position as of May 31, 1997 consists of Caliber’s financial position as of December 31, 1996 consolidated with FedEx’s financial position as of May 31, 1997. The results of operations for FedEx and Caliber and the combined amounts presented in the Company’s consolidated ﬁnancial statements are as follows: In thousands Revenues: FedEx Caliber Net Income (Loss): FedEx Caliber Other Changes in Common Stockholders’ Investment: FedEx Caliber Years Ended May 31, Six Months Ended November 30, 1997 1997 1996 (Unaudited) $11,519,750 $10,273,619 $6,596,377 2,718,142 2,448,172 1,212,132 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $14,237,892 $12,721,791 $7,808,509 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $ 361,227 $ 307,777 $ 250,272 (165,123) (27,205) 64,329 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $ 196,104 $ 280,572 $ 314,601 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $ 25,148 $ 22,793 $ (32,531) (251,888) (3,254) (3,826) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $ (7,383) $ (229,095) $ (7,080) Due to the different ﬁscal year ends, Caliber’s results for the 20-week period from January 1, 1997 to May 24, 1997 are not included in the restated ﬁnancial state- ments for 1998 or 1997. For this period, Caliber had revenues of $1,028,119,000, operating expenses of $1,083,898,000, a net loss of $40,912,000, divi- dends declared of $10,883,000 and other changes, net, in common stockholders’ investment of $1,273,000. Accordingly, an adjustment has been included in the Company’s Consolidated Statements of Changes in Common Stockholders’ Investment for the year ended May 31, 1998 to reﬂect this activity. In 1998, the Company incurred $88,000,000 of expenses related to the acquisition of Caliber and the formation of the Company, primarily investment banking fees and payments to members of Caliber’s manage- ment in accordance with pre-existing management retention agreements. P 3 8 FDX CORPORATION NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation. The consolidated ﬁnancial statements include the accounts of FDX Corporation and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Property and equipment. Expenditures for major addi- tions, improvements, ﬂight equipment modiﬁcations, and certain overhaul costs are capitalized. Maintenance and repairs are charged to expense as incurred, except for B747 airframe and engine overhaul maintenance which is accrued and charged to expense on the basis of hours ﬂown. The cost and accumulated depreciation of property and equipment disposed of are removed from the related accounts, and any gain or loss is reﬂected in the results of operations. For financial reporting purposes, depreciation and amortization of property and equipment is provided on a straight-line basis over the asset’s service life or related lease term as follows: Flight equipment 5 to 20 years Package handling and ground support equipment and vehicles 5 to 30 years Computer and electronic equipment 3 to 10 years Other 2 to 30 years Aircraft airframes and engines are assigned residual values ranging from 10% to 20% of asset cost. All other property and equipment have no assigned residual val- ues. Vehicles are depreciated on a straight-line basis over 5 to 10 years. For income tax purposes, depreciation is generally com- puted using accelerated methods. Deferred gains. Gains on the sale and leaseback of air- craft and other property and equipment are deferred and amortized over the life of the lease as a reduction of rent expense. Included in other liabilities at May 31, 1998 and 1997, were deferred gains of $338,119,000 and $340,166,000, respectively. Deferred lease obligations. While certain of the Com- pany’s aircraft and facility leases contain ﬂuctuating or escalating payments, the related rent expense is recorded on a straight-line basis over the lease term. Included in other liabilities at May 31, 1998 and 1997, were $324,203,000 and $289,822,000, respec- tively, representing the cumulative difference between rent expense and rent payments. Self-insurance reserves. The Company is self-insured up to certain levels for workers’ compensation, employee health care and vehicle liabilities. Reserves are based on the actuarially estimated cost of claims. Included in other liabilities at May 31, 1998 and 1997, were $277,696,000 and $275,663,000, respectively, rep- resenting the long-term portion of self-insurance reserves for the Company’s workers’ compensation and vehicle liabilities. Capitalized interest. Interest on funds used to ﬁnance the acquisition and modiﬁcation of aircraft and construc- tion of certain facilities up to the date the asset is placed in service is capitalized and included in the cost of the asset. Capitalized interest was $33,009,000, $45,717,000 and $44,624,000 for 1998, 1997 and 1996, respectively. Advertising. Advertising costs are generally expensed as incurred and are included in other operating expenses. Adver tising expenses were $183,253,0 0 0 , $162,337,000 and $145,592,000 for 1998, 1997 and 1996, respectively. Cash equivalents. Cash equivalents are cash in excess of current operating requirements invested in short- term, interest-bearing instruments with maturities of three months or less at the date of purchase and are stated at cost, which approximates market value. Inter- est income was $11,283,000, $5,885,000 and $19,059,000 in 1998, 1997 and 1996, respectively. Spare parts, supplies and fuel. Spare parts are stated principally at weighted-average cost; supplies and fuel are stated principally at standard cost which approximates actual cost on a ﬁrst-in, ﬁrst-out basis. Neither method values inventory in excess of current replacement cost. Goodwill. Goodwill is the excess of the purchase price over the fair value of net assets of businesses acquired. It is amortized on a straight-line basis over periods rang- ing up to 40 years. Accumulated amortization was $144,580,000 and $131,927,000 at May 31, 1998 and 1997, respectively. Foreign currency translation. Translation gains and losses of the Company’s foreign operations that use local currencies as the functional currency are accumu- lated and reported, net of related deferred income taxes, as a component of common stockholders’ invest- ment. Transaction gains and losses that arise from exchange rate ﬂuctuations on transactions denominated in a currency other than the local functional currency are included in the results of operations. Income taxes. Deferred income taxes are provided for the tax effect of temporary differences between the tax basis of assets and liabilities and their reported amounts in the ﬁnancial statements. The Company uses the liability method to account for income taxes, which requires deferred taxes to be recorded at the statutory rate expected to be in effect when the taxes are paid. The Company has not provided for U.S. federal income taxes on its foreign subsidiaries’ earnings deemed to be permanently reinvested. Quantiﬁcation of the deferred tax liability, if any, associated with permanently rein- vested earnings is not practicable. Revenue recognition. Revenue is generally recognized upon delivery of shipments. For shipments in transit, revenue is recorded based on the percentage of serv- ice completed. Earnings per share. In accordance with the provisions of Statement of Financial Accounting Standards FDX CORPORATION P 3 9 N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S No. 128, “Earnings Per Share,” basic earnings per share is computed by dividing net income by the number of weighted-average common shares outstanding during the year. Diluted earnings per share is computed by dividing net income by the number of weighted-average common and common equivalent shares outstanding during the year (See Note 8). Recent pronouncements. In 1999, the Company will adopt the provisions of three Statements of Financial Accounting Standards (“SFAS”) recently issued by the Financial Accounting Standards Board. SFAS No. 130, “Reporting Comprehensive Income,” establishes stan- dards for displaying comprehensive income and its components in a full set of general purpose ﬁnancial statements. SFAS No. 131, “Disclosures about Seg- ments of an Enterprise and Related Information,” estab- lishes standards for reporting information about operating segments in annual ﬁnancial statements and requires reporting selected information about operating segments in interim ﬁnancial reports issued to share- holders. SFAS No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Beneﬁts,” standard- izes the disclosures for pensions and other postretire- ment benefits to the extent practicable, requires additional information on changes in the beneﬁt obliga- tions and fair values of plan assets that will facilitate ﬁnancial analysis and eliminates other disclosures no longer useful as prescribed in previous standards. SFAS Nos. 130, 131 and 132 only affect ﬁnancial disclo- sures in interim and annual reports; therefore, the adoption of these accounting standards will not have an impact on the Company’s ﬁnancial condition or results of operations. Effective June 1,1998, the Company adopted Statement of Position (“SOP”) 98-1, “Accounting for the Cost of Computer Software Developed or Obtained for Internal Use,” released by the American Institute of Certiﬁed Public Accountants in March 1998. SOP 98-1 provides guidance on accounting for these costs and requires that certain related expenses be capitalized. The Com- pany estimates the pre-tax beneﬁt of the adoption of this Statement to be approximately $30,000,000 in 1999. Reclassiﬁcations. Certain prior year amounts have been reclassiﬁed to conform to the 1998 presentation. Use of estimates. The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the ﬁnancial statements and the reported amounts of rev- enues and expenses during the reporting period. Actual results could differ from those estimates. 1998 1997 $ 292,173 $ 266,397 278,550 190,056 188,464 143,876 73,643 234,138 260,724 145,556 159,180 126,030 84,006 181,146 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $1,400,900 $1,223,039 NOTE 3: ACCRUED EXPENSES May 31 In thousands Insurance Compensated absences Employee beneﬁts Taxes other than income taxes Salaries Aircraft overhaul Other P 4 0 FDX CORPORATION NOTE 4: LONG-TERM DEBT May 31 In thousands Unsecured notes payable, interest rates of 7.60% to 10.57%, due through 2098 Unsecured sinking fund debentures, interest rate of 9.63%, due through 2020 Commercial paper Capital lease obligations and tax exempt bonds, due through 2017, interest rates of 5.35% to 7.88% Less bond reserves Other debt, interest rates of 9.68% to 9.98% Less current portion 1998 1997 $1,253,770 $1,128,525 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 98,529 98,461 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) — 200,904 253,425 9,024 255,100 11,096 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 244,401 244,004 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 46,009 52,726 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 1,642,709 1,724,620 257,529 126,666 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $1,385,180 $1,597,954 The Company has a revolving credit agreement with domestic and foreign banks that provides for a total commitment of $1,000,000,000, all of which was available at May 31,1998. This agreement is composed of two parts. The ﬁrst part provides for a commitment of $800,000,000 through January 15, 2003. The sec- ond part provides for a commitment of $200,000,000 through January 14, 1999. Interest rates on borrowings under this agreement are generally determined by maturi- ties selected and prevailing market conditions. The agree- ment contains certain covenants and restrictions, none of which are expected to signiﬁcantly affect operations or the ability to pay dividends. As of May 31,1998, approximately $1,066,000,000 was available for the payment of divi- dends under the restrictive covenant of the agreement. Commercial paper borrowings are backed by unused com- mitments under the revolving credit agreement and reduce the amount available under the agreement. Bor- rowings under this credit agreement and commercial paper borrowings are classiﬁed as long-term based on the Company’s ability and intent to reﬁnance such borrowings. Tax exempt bonds were issued by the Memphis-Shelby County Airport Authority (“MSCAA”) and the City of Indi- anapolis. A lease agreement with the MSCAA and a loan agreement with the City of Indianapolis covering the facil- ities and equipment ﬁnanced with the bond proceeds obligate FedEx to pay rentals and loan payments, respec- tively, equal to principal and interest due on the bonds. Caliber has issued $200,000,000 of unsecured notes which is included in long-term debt. The notes mature on August 1, 2006 and bear interest at 7.80%. The notes contain restrictive covenants limiting the ability of Caliber and its subsidiaries to incur liens on assets and enter into certain leasing transactions. In July 1997, the MSCAA issued $20,105,000 of 5.35% Special Facilities Revenue Bonds. The proceeds of the bonds in combination with other funds were used to refund outstanding MSCAA 1982B 8.3% bonds on September 2, 1997. The 1997 bonds have a maturity date of September 1, 2012. FedEx is obligated under a lease agreement with MSCAA to pay rentals equal to the principal and interest on the bonds. In July 1997, FedEx issued $250,000,000 of 7.6% unsecured senior notes due July 1, 2097, under its July 1996 shelf registration statement ﬁled with the Securi- ties and Exchange Commission. Scheduled annual principal maturities of long-term debt for the ﬁve years subsequent to May 31, 1998, are as follows: $257,500,000 in 1999; $14,900,000 in 2000; $11,300,000 in 2001; $206,900,000 in 2002; and $10,900,000 in 2003. The Company’s long-term debt, exclusive of capital leases, had carrying values of $1,446,000,000 and $1,322,000,000 at May 31, 1998 and 1997, respec- tively, compared with fair values of approximately $1,597,000,000 and $1,423,000,000 at those dates. The estimated fair values were determined based on quoted market prices or on current rates offered for debt with similar terms and maturities. NOTE 5: LEASE COMMITMENTS The Company utilizes certain aircraft, land, facilities and equipment under capital and operating leases which expire at various dates through 2025. In addition, sup- plemental aircraft are leased under agreements which generally provide for cancellation upon 30 days’ notice. FDX CORPORATION P 4 1 N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S Property and equipment recorded under capital leases at May 31 was as follows: In thousands Package handling and ground support equipment and vehicles Facilities Computer and electronic equipment and other Less accumulated amortization Rent expense under operating leases for the years ended May 31 was as follows: 1998 1997 $261,985 $274,017 134,442 6,518 134,442 6,520 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 402,945 274,494 414,979 277,406 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $128,451 $137,573 In thousands Minimum rentals Contingent rentals 1998 1997 1996 $1,135,567 $ 986,758 $866,865 60,925 57,806 61,164 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $1,196,492 $1,044,564 $928,029 Contingent rentals are based on mileage under supplemental aircraft leases. A summary of future minimum lease payments under capital leases and non-cancellable operating leases (principally air- craft and facilities) with an initial or remaining term in excess of one year at May 31, 1998 follows: In thousands 1999 2000 2001 2002 2003 Thereafter Capital Leases Operating Leases $ 15,023 $ 960,462 15,023 15,023 15,023 15,023 918,193 843,352 778,016 716,559 317,397 8,225,590 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $392,512 $12,442,172 At May 31, 1998, the present value of future minimum lease payments for capital lease obligations was $200,183,000. NOTE 6: 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 prefer- ences and has no par value. As of May 31, 1998, none of these shares had been issued. NOTE 7: COMMON STOCKHOLDERS’ INVESTMENT Stock Compensation Plans At May 31,1998, the Company had options and awards outstanding under 12 stock-based compensation plans consisting of nine ﬁxed stock option plans and three restricted stock plans, which are described below. As of May 31, 1998, there were 10,049,688 shares of com- mon stock reserved for issuance under these plans. The Board of Directors has authorized repurchase of the Company’s common stock necessary for grants under its restricted stock plans. As of May 31, 1998, a total of 6,112,517 shares at an average cost of $23.61 per share had been purchased and reissued under the above-mentioned plans. On January 27, 1998, as part of the Caliber acquisition,1,950,251 shares of Cal- iber treasury stock (equivalent to 1,560,201 shares of FDX common stock) were cancelled. The Company applies Accounting Principles Board Opin- ion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for its plans. Accordingly, no compensation cost was recognized for its ﬁxed stock option plans. The compensation cost charged against income for its restricted stock plans was $5,817,000, $3,421,000 and $2,227,000 for 1998, 1997 and 1996, respectively. Had compensation cost for the Company’s stock-based compensation plans been determined consistent with SFAS 123, “Account- ing for Stock-Based Compensation,” P 4 2 FDX CORPORATION the Company’s net income and earnings per share would have been the pro forma amounts indicated below: In thousands, except per share data Net income: As reported Pro forma Earnings per share, assuming dilution: As reported Pro forma 1998 1997 1996 $503,030 $196,104 $280,572 489,556 187,624 275,299 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $ 3.37 3.28 $ 1.33 1.27 $ 1.92 1.89 The pro forma disclosures, applying SFAS 123, are not likely to be representative of pro forma disclosures for future years. The pro forma effect is not expected to be fully reﬂected until 2002 since SFAS 123 is applicable to options granted by the Company after May 31, 1995, and because options vest over several years and addi- tional grants could be made. Fixed Stock Option Plans Under the provisions of the Company’s stock incentive plans, options may be granted to certain key employees (and, under the 1993 plan, to directors who are not employees of the Company) to purchase shares of com- mon stock of the Company at a price not less than its fair market value at the date of grant. Options granted have a maximum term of 10 years. Vesting require- ments are determined at the discretion of the Compen- sation Committee of the Board of Directors. Presently, option vesting periods range from one to seven years. At May 31, 1998, there were 2,863,362 shares avail- able for future grants under these plans. Beginning with the grants made on or after June 1, 1995, the fair value of each option grant was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions for each option grant: Dividend yield Expected volatility Risk-free interest rate Expected lives 1998 0% 25% 1997 0% 25% 1996 0% 25% 5.4%–6.5% 5.8%–6.9% 5.9%–6.4% 2.5–6.5 years 2.5–8.5 years 2.5–7.5 years The following table summarizes information about the Company’s ﬁxed stock option plans for the years ended May 31: 1998 1997 1996 Weighted- Average Exercise Price Weighted- Average Exercise Price Weighted- Average Exercise Price Shares Shares Shares 6,761,730 1,242,772 (1,168,492) (141,784) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $34.17 6,444,178 $31.53 6,377,979 $27.59 56.40 1,700,532 40.04 1,823,369 26.89 (1,136,503) 27.30 (1,421,890) 39.01 (268,030) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 35.98 (335,280) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 40.71 25.41 32.46 6,694,226 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 39.47 6,740,177 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 34.21 6,444,178 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 31.53 Outstanding at beginning of year Granted Exercised Forfeited Outstanding at end of year Exercisable at end of year 2,674,813 33.84 2,265,149 27.84 2,452,800 25.10 FDX CORPORATION P 4 3 N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S The weighted-average fair value of options granted during the year was $16.49, $16.23 and $13.07 for the years ended May 31, 1998, 1997 and 1996, respectively. The following table summarizes information about ﬁxed stock options outstanding at May 31, 1998: Range of Exercise Prices $15.28—$22.56 $23.13—$33.25 $35.00—$52.88 $59.06—$79.75 $15.28—$79.75 Options Outstanding Options Exercisable Weighted- Average Weighted- Remaining Number Contractual Average Exercise Number Outstanding Life Price Exercisable Weighted- Average Exercise Price 363,615 4.0 years $19.80 362,975 $19.80 1,977,616 5.4 years 3,983,415 7.8 years 369,580 9.4 years (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 30.30 43.41 65.38 1,199,998 1,111,840 — (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 6,694,226 7.0 years 39.47 2,674,813 29.97 42.61 — 33.84 Restricted Stock Plans Under the terms of the Company’s Restricted Stock Plans, shares of the Company’s common stock are awarded to key employees. All restrictions on the shares expire over periods varying from two to ﬁve years from their date of award. Shares are valued at the market price of the Company’s common stock at the date of award. Compensation expense related to these plans is recorded as a reduction of common stock- holders’ investment and is being amortized as restric- tions on such shares expire. The following table summarizes information about restricted stock awards for the years ended May 31: 1998 1997 1996 Weighted- Average Weighted- Average Weighted- Average Shares Fair Value Shares Fair Value Shares Fair Value Awarded Forfeited 120,000 14,000 $65.98 69.88 201,900 18,000 $51.93 40.03 350,500 29,000 $39.65 38.96 At May 31, 1998, there were 492,100 shares available for future awards under these plans. P 4 4 FDX CORPORATION NOTE 8: COMPUTATION OF EARNINGS PER SHARE The calculation of basic and diluted earnings per share for the years ended May 31 was as follows: In thousands, except per share amounts: Income from continuing operations Loss from discontinued operations Income (loss) from discontinuance Net income applicable to common stockholders 1998 1997 1996 $498,155 — 4,875 $196,104 — — $400,186 (69,950) (49,664) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $503,030 $196,104 $280,572 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) Average shares of common stock outstanding 146,701 145,713 144,695 Basic earnings per share: Continuing operations Discontinued operations Loss from discontinued operations Income (loss) from discontinuance $ 3.40 $ 1.35 $ 2.76 — .03 — — (.48) (.34) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $ 3.43 $ 1.35 $ 1.94 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) Average shares of common stock outstanding 146,701 145,713 144,695 Common equivalent shares: Assumed exercise of outstanding dilutive options Less shares repurchased from proceeds of assumed exercise of options 6,924 6,100 5,250 (4,421) (4,585) (4,102) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) Average common and common equivalent shares 149,204 147,228 145,843 Diluted earnings per share: Continuing operations Discontinued operations Loss from discontinued operations Income (loss) from discontinuance NOTE 9: INCOME TAXES $ 3.34 $ 1.33 $ 2.74 — .03 — — (.48) (.34) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $ 3.37 $ 1.33 $ 1.92 The components of the provision for income taxes for the years ended May 31 were as follows: In thousands Current provision: Domestic Federal State and local Foreign Deferred provision: Domestic Federal State and local Foreign 1998 1997 1996 $267,471 $153,244 $197,948 32,839 36,543 29,344 44,165 24,431 37,759 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 336,853 226,753 260,138 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 56,408 7,860 242 577 95 2,336 35,021 4,398 2,351 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 64,510 3,008 41,770 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $401,363 $229,761 $301,908 FDX CORPORATION P 4 5 N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S The Company’s operations included the following income (loss) with respect to entities in foreign locations for the years ended May 31: In thousands Entities with pre-tax income Entities with pre-tax losses 1998 1997 1996 $ 208,000 $ 205,000 $ 153,000 (306,000) (191,000) (236,000) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $ (98,000) $ 14,000 $ (83,000) Income taxes have been provided for foreign operations based upon the various tax laws and rates of the coun- tries in which the Company’s operations are conducted. There is no direct relationship between the Company’s overall foreign income tax provision and foreign pre-tax book income due to the different methods of taxation used by countries throughout the world. A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate for the years ended May 31 is as follows: Statutory U.S. income tax rate Increase resulting from: Goodwill amortization Foreign operations State and local income taxes, net of federal beneﬁt Other, net Non-recurring items (Caliber acquisition 1998, Viking restructuring 1997) Effective tax rate 1998 1997 1996 35.0% 35.0% 35.0% 0.5 0.8 2.7 2.5 3.1 0.9 0.7 2.9 3.5 10.9 1.0 1.7 2.6 2.7 — (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 44.6% 53.9% 43.0% (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) Effective tax rate (excluding non-recurring items) 41.5% 43.0% 43.0% The signiﬁcant components of deferred tax assets and liabilities as of May 31 were as follows: In thousands Depreciation Deferred gains on sales of assets Employee beneﬁts Self-insurance reserves Other 1998 1997 Deferred Deferred Deferred Deferred Tax Assets Tax Liabilities Tax Assets Tax Liabilities $ — $523,843 $ — $429,350 86,053 126,513 204,303 183,941 — 22,595 — 95,729 83,413 88,467 196,684 189,986 — 18,830 — 95,246 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $600,810 $642,167 $558,550 $543,426 NOTE 10: PENSION AND PROFIT SHARING PLANS The Company sponsors deﬁned beneﬁt pension plans covering substantially all employees. The largest plans cover U.S. domestic employees age 21 and over, with at least one year of service and provide beneﬁts based on ﬁnal average earnings and years of service. Plan funding is actuarially determined, subject to certain tax law limitations. International deﬁned beneﬁt pension plans provide ben- efits primarily based on final earnings and years of service and are funded in accordance with local laws and income tax regulations. P 4 6 FDX CORPORATION The following table sets forth the funded status of the plans as of May 31: In thousands Plan assets at fair value Actuarial present value of the projected beneﬁt obligation for service rendered to date Plan assets in excess of projected beneﬁt obligation Unrecognized net gains from past experience different from that assumed and effects of changes in assumptions Prior service cost not yet recognized in net periodic cost Unrecognized transition amount Adjustment required to recognize minimum liability Net pension asset Accumulated beneﬁt obligation Vested beneﬁt obligation 1998 1997 $4,434,870 $3,615,028 4,121,795 3,151,083 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 313,075 463,945 (196,519) (338,491) 5,757 (13,197) (847) 16,063 (13,695) — (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $ 108,269 $ 127,822 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $2,865,542 $2,098,875 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $2,684,692 $1,950,809 Net periodic pension cost for the years ended May 31 included the following components: In thousands Service cost — beneﬁts earned during the period Interest cost on projected beneﬁt obligation Actual return on plan assets Net amortization and deferral 1998 1997 1996 $ 250,753 $ 246,443 $ 196,990 245,697 221,975 174,130 (730,436) (463,442) (474,434) 350,711 141,514 260,335 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $116,725 $ 146,490 $ 157,021 The following actuarial assumptions were used in determining net pension cost and projected beneﬁt obligations: Weighted-average discount rate Weighted-average rate of increase in future compensation levels Weighted-average expected long-term rate of return on assets 1998 1997 1996 7.0% 4.6 10.3 8.0% 5.4 10.3 7.9% 5.4 9.3 Plan assets consist primarily of marketable equity secu- rities and ﬁxed income instruments. The Company also has proﬁt sharing plans, which cover substantially all U.S. domestic employees age 21 and over, with at least one year of service with the Company as of the contribution date. The plans provide for discre- tionary employer contributions which are determined annually by the Board of Directors. Profit sharing expense was $124,700,000 in 1998, $107,400,000 in 1997 and $95,000,000 in 1996. The 1998 amount consists of contributions to the plans of $81,600,000 and cash distributions made outside the plans directly to employees of $43,100,000. The 1997 amount con- sists of contributions to the plans of $78,800,000 and cash distributions made outside the plans directly to employees of $28,600,000. NOTE 11: POSTRETIREMENT BENEFIT PLANS FedEx offers medical and dental coverage to all eligible U.S. domestic retirees and their eligible dependents. Vision coverage is provided for retirees, but not their dependents. Substantially all of FedEx’s U.S. domestic employees become eligible for these beneﬁts at age 55 and older, if they have permanent, continuous service with FedEx of at least 10 years after attainment of age 45 if hired prior to January 1, 1988, or at least 20 years after attainment of age 35, if hired on or after January 1, 1988. Life insurance beneﬁts are provided only to retirees of the former Tiger International, Inc. who retired prior to acquisition. Certain of the Caliber companies offer similar beneﬁts to their eligible retirees. FDX CORPORATION P 4 7 N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S The following table sets forth the accrued postretirement beneﬁt cost as of May 31: In thousands Accumulated postretirement beneﬁt obligation: Retirees Fully eligible active employees Other active employees, not fully eligible Unrecognized net gain Unrecognized prior service beneﬁt 1998 1997 $ 52,559 $ 46,469 44,141 120,327 42,221 95,844 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) 217,027 13,531 1,477 184,534 29,291 — (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $232,035 $213,825 Net postretirement beneﬁt cost for the years ended May 31 was as follows: In thousands Service cost Interest cost Amortization of accumulated gains Amortization of unrecognized prior service beneﬁt 1998 1997 1996 $18,385 14,767 $17,830 13,663 $13,608 12,577 (619) (90) (252) — (802) — (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $32,443 $31,241 $25,383 FedEx’s future medical beneﬁt costs were estimated to increase at an annual rate of 9.5% during 1999, decreasing to an annual growth rate of 5.25% in 2008 and thereafter. Future dental beneﬁt costs were esti- mated to increase at an annual rate of 8.0% during 1999, decreasing to an annual growth rate of 5.25% in 2010 and thereafter. FedEx’s cost is capped at 150% of 1993 employer cost and, therefore, will not be sub- ject to medical and dental trends after the capped cost is attained, projected to be in 2000. Caliber’s health care costs were estimated to increase at an annual rate of 8.5% during 1999, decreasing to an annual growth rate of 5.25% in 2005 and thereafter. Primar- ily because of the cap on FedEx’s cost, a 1% increase in these annual trend rates would not have a signiﬁcant impact on the accumulated postretirement benefit obligation of the Company at May 31, 1998, or 1998 b e n ef i t ex p e n s e . T h e we i g h t e d - av e ra g e d i s - count rates used in estimating the accumulated post- retirement beneﬁt obligation were 7.2% and 7.8% at May 31, 1998 and 1997, respectively. The Company pays claims as incurred. NOTE 12: BUSINESS SEGMENT INFORMATION The Company is primarily composed of the operations of FedEx and RPS, Inc. (“RPS”). FedEx is in a single line of business — the worldwide express transportation and distribution of goods and documents. RPS is a ground small-package carrier. The operations represented in the Other category are also in the transportation indus- try and include Viking Freight, Inc. (“Viking”), a regional freight carrier, Caliber Logistics, Inc., a contract logis- tics provider and Roberts Express, Inc., a surface expe- dited carrier. For reporting purposes, operations for FedEx are classi- ﬁed into two geographic areas, U.S. domestic and inter- national. Shipments which either originate in or are destined to locations outside the United States are cate- gorized as international. P 4 8 FDX CORPORATION A summary of selected ﬁnancial information for the Company’s operations for the years ended or at May 31 is as follows: In thousands Revenues: 1998 1997 1996 Operating Income (Loss): 1998 1997 1996 Identiﬁable Assets: 1998 1997 FedEx U.S. Domestic FedEx International RPS Other Total $9,665,342 $3,589,499 $1,710,378 $ 907,591 $15,872,810 8,322,037 7,466,311 3,197,713 2,807,308 1,344,307 1,373,835 14,237,892 1,292,748 1,155,424 12,721,791 $ 752,563 $ 84,170 $ 172,033 $ 1,894(1) $ 1,010,660 558,040 542,168 141,002 81,656 135,721 173,610 (327,761)(2) (17,882) 507,002 779,552 $6,872,952 $1,560,154 $ 799,733 $ 453,221 $ 9,686,060 6,122,885 1,502,601 713,887 704,943 9,044,316 (1) Includes $74,000,000 of merger expenses. See Note 1. (2) Includes charges related to the Viking restructuring. See Note 17. Identiﬁable assets used jointly in U.S. domestic and international operations (principally aircraft) have been allocated based on estimated usage. International rev- enues related to services originating in the United NOTE 13: SUPPLEMENTAL CASH FLOW INFORMATION States totaled $1,588,400,000, $1,433,700,000 and $1,316,100,000 for the years ended May 31, 1998, 1997 and 1996, respectively. Cash paid for interest expense and income taxes for the years ended May 31 was as follows: In thousands Interest (net of capitalized interest) Income taxes 1998 1997 1996 $130,250 $108,828 $116,535 355,563 195,253 245,487 Non-cash investing and ﬁnancing activities for the years ended May 31 were as follows: In thousands Fair value of assets surrendered under exchange agreements (with two airlines) Fair value of assets acquired under exchange agreements Fair value of assets receivable under exchange agreements NOTE 14: COMMITMENTS AND CONTINGENCIES 1998 1997 1996 $90,428 $62,018 78,148 12,280 46,662 15,356 — — — The Company’s annual purchase commitments under various contracts as of May 31, 1998, were as follows: In thousands 1999 2000 2001 2002 2003 Aircraft Aircraft- Related(1) Other (2) Total $530,500 $484,300 $487,400 $1,502,200 584,600 269,800 240,600 457,400 397,200 319,700 147,200 156,600 168,500 1,150,300 34,200 9,300 — 623,700 397,100 614,000 (1) Primarily aircraft modiﬁcations, rotables, and spare parts and engines. (2) Facilities, vehicles, computer and other equipment. FDX CORPORATION P 4 9 N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S At May 31, 1998, FedEx was committed to purchase 12 Airbus A300s, 35 MD11s and 50 Ayers ALM 200s to be delivered through 2007. Deposits and progress payments of $94,459,000 have been made toward these purchases. During 1997, FedEx entered into agreements with two airlines to acquire 53 DC10s, spare parts, aircraft engines and other equipment, and maintenance ser- vices 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. Addi- tionally, 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. In March 1998, put options were exercised by an airline requiring FedEx to purchase seven MD11s for a total purchase price of $416,000,000. Delivery of the air- craft will begin in 2000. FedEx has entered into contracts which are designed to limit its exposure to ﬂuctuations in jet fuel prices. Under these contracts, FedEx makes (or receives) payments based on the difference between a speciﬁed lower (or upper) limit and the market price of jet fuel, as deter- mined by an index of spot market prices representing various geographic regions. The difference is recorded as an increase or decrease in fuel expense. At May 31, 1998, all such contracts had expired. At May 31, 1997, FedEx had contracts with various ﬁnancial institutions covering a total notional volume of 396,900,000 gal- lons (approximately 54% of FedEx’s annual jet fuel con- sumption), with some contracts extending through May 1998. Based on market prices at May 31, 1997, the fair value of these contracts was a liability of approx- imately $418,000 as of such date. Under jet fuel con- tracts, FedEx made payments of $28,764,000 in 1998, received $15,162,000 (net of payments) in 1997 and received $1,977,000 in 1996. NOTE 15: 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 of 1996. The plaintiffs seek certiﬁcation as a class action, damages, an injunction to enjoin FedEx from con- tinuing 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. P 5 0 FDX CORPORATION 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 contin- ued to collect the excise tax on the transportation of property shipped by air after the tax expired on Decem- ber 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 expi- ration. The Taxpayer Relief Act of 1997, signed by Presi- dent Clinton in August 1997, extended the tax for 10 years through September 30, 2007. FedEx intends to vigorously defend itself in these cases. No amount has been reserved for these contingencies. FDX Corporation 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. NOTE 16: DISCONTINUED OPERATIONS On January 2, 1996, Caliber distributed to its share- holders 95% of the issued and outstanding shares of common stock of Roadway Express, Inc. (“REX”), its wholly-owned subsidiary. This distribution, which was tax-free for federal income tax purposes to Caliber and its shareholders, was made to the holders of record of Caliber’s common stock at the close of business on December 29, 1995. Shareholders received one share of REX common stock for every two shares of Caliber common stock held on that date. As a result, shareholders’ equity was reduced by $199,700,000, which represented the book value of the net assets distributed. Caliber’s remaining invest- ment in REX amounted to $8,40 0 ,0 0 0 and is included in other assets as of May 31, 1997. The remaining investment in REX was sold during the ﬁrst quarter of 1998. On November 6, 1995, Caliber announced plans to exit the air freight business served by its wholly-owned sub- sidiary, Roadway Global Air, Inc. (“RGA”). Caliber recorded a pre-tax charge of $64,925,000 related to the discontinuance of this business. Income from dis- continuance of $4,875,000, net of tax, in 1998 included the favorable settlement of leases and other contractual obligations. Loss from discontinued operations for the year ended May 31, 1996 consists of the following: In thousands Revenue Operating expenses Operating loss Other expense, net Loss before income taxes Income tax beneﬁt REX RGA Total $2,288,845 $ 99,425 $2,388,270 2,299,615 180,557 2,480,172 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (10,770) (3,103) (81,132) (6,571) (91,902) (9,674) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (13,873) 1,206 (87,703) 30,420 (101,576) 31,626 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) Loss from discontinued operations $ (12,667) $ (57,283) $ (69,950) The loss from discontinuance for the year ended May 31, 1996 consists of the following: In thousands Costs related to the discontinuance of RGA’s air freight business Transaction costs for the spin-off of REX Loss before income taxes Income tax beneﬁt Loss from discontinuance NOTE 17: UNUSUAL EVENTS In 1998, FedEx realized a net gain of $17,000,000 from the insurance settlement and the release from certain related liabilities on a leased MD11 aircraft destroyed in an accident in July 1997. The gain was recorded in operating and non-operating income in sub- stantially equal amounts. I n 19 9 7, F e d E x ’s o p e rat i n g i n c o m e i n c l u d e d a $15,000,000 pre-tax beneﬁt from the settlement of a Tennessee personal property tax matter. Also in 1997, FedEx recorded a $17,100,000 non-operating gain from an insurance settlement for a DC10 aircraft destroyed by ﬁre in September 1996. On March 27, 1997, Caliber announced a major restruc- turing of its Viking subsidiary. As a result of the restruc- turing, Viking’s southwestern division (formerly Central Freight Lines Inc.) was sold during the ﬁrst quarter of 1998 and operations at Viking’s midwestern, eastern and northeastern divisions (formerly Spartan Express, Inc. and Coles Express, Inc.) ceased on March 27,1997. In connection with the restructuring, Caliber recorded a pre-tax asset impairment charge of $225,000,000 ($175,000,000, net of tax) in 1997 and a pre-tax restructuring charge of $85,000,000 ($56,400,000, net of tax) in the period from January 1, 1997 to May 24, 1997. This restructuring charge is included in the adjustment to conform Caliber’s ﬁscal year in the accompanying Consolidated Statements of Changes in Common Stockholders’ Investment and, therefore, is excluded from the Consolidated Statements of Income. Components of the $85,000,000 restructuring charge include asset impairment charges, future lease costs and other contractual obligations, employee severance and other beneﬁts and other exit costs. Gains on assets $(64,925) (7,518) (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) (72,443) 22,779 (cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112)(cid:112) $(49,664) sold in the restructuring of $16,000,000 were recog- nized in the third quarter of 1998. The long-lived asset impairment charge in 1997 of $225,000,000 resulted from Caliber’s assessment of the ongoing value of property and equipment (primarily real estate and revenue equipment) used in Viking’s operations which was determined to be impaired under SFAS No. 121, “Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to be Disposed Of.” Accordingly, these assets were written down to fair value in the Company’s May 31, 1997 ﬁnancial state- ments. Fair value was based on estimates of appraised values for real estate and quoted prices for equipment. Assets held for sale from the restructuring (principally real estate and revenue equipment) are included in property and equipment in the accompanying consoli- dated balance sheet. Caliber completed the sale of all but $11,640,000 of the assets to be disposed of dur- ing 1998. Remaining accrued restructuring costs at May 31, 1998 of $18,900,000 relate primarily to future lease obligations. Results of operations associ- ated with the assets held for disposal are included in operating results in 1998 and 1997. FedEx received $7,800,000 in 1996 from the bank- ruptcy estate of a ﬁrm engaged by FedEx in 1990 to remit payments of employee withholding taxes. This amount is a partial recovery of a $32,000,000 loss incurred by FedEx in 1991 that resulted from the ﬁrm’s failure to remit certain of these tax payments to appro- priate authorities. FedEx has received $17,900,000 from the bankruptcy estate of the ﬁrm. All major issues pertaining to the bankruptcy have been resolved, and any additional amounts FedEx may receive are expected to be insigniﬁcant. FDX CORPORATION P 5 1 N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S NOTE 18: SUMMARY OF QUARTERLY OPERATING RESULTS (UNAUDITED) In thousands, except earnings per share 1998 Revenues Operating income Income before income taxes Income from continuing operations Net income Earnings per common share Earnings per common share — assuming dilution 1997 Revenues Operating income Income before income taxes Income from continuing operations Net income (loss) Earnings (loss) per common share Earnings (loss) per common share — assuming dilution First Quarter (1) Second Quarter(2) Third Fourth Quarter(3,4) Quarter(5,6) $3,866,491 $3,942,018 $3,986,304 $4,077,997 303,905 284,786 164,777 164,777 1.13 1.11 $ $ 288,949 256,719 149,824 149,824 1.02 1.00 $ $ 95,381 63,670 12,836 17,711 $ $ .12 .12 $ $ 322,425 294,343 170,718 170,718 1.16 1.14 $3,274,386 $3,468,270 $3,534,045 $3,961,191 148,099 124,688 71,571 71,571 186,341 180,422 103,937 103,937 133,151 106,803 61,018 61,018 $ $ .49 .49 $ $ .71 .71 $ $ .42 .41 $ $ 39,411 13,952 (40,422) (40,422) (.28) (.28) (1) First quarter 1998 included Caliber’s results for the 12-week period from May 25,1997 to August 16,1997 consolidated with FedEx’s results for the three months ended August 31, 1997. First quarter 1997 included Caliber’s results for the 12-week period from January 1, 1996 to March 23, 1996 consolidated with FedEx’s results for the three months ended August 31, 1996. (2) Second quarter 1998 included Caliber’s results for the 12-week period from August 17, 1997 to November 8, 1997 consolidated with FedEx’s results for the three months ended November 30, 1997. Second quarter 1997 included Caliber’s results for the 12-week period from March 24, 1996 to June 15, 1996 consolidated with FedEx’s results for the three months ended November 30, 1996. (3) Third quarter 1998 included Caliber’s results for the 16-week period from November 9,1997 to February 28,1998 consolidated with FedEx’s results for the three months ended February 28, 1998. Third quarter 1997 included Caliber’s results for the 12-week period from June 16, 1996 to September 7, 1996 consolidated with FedEx’s results for the three months ended February 28, 1997. (4) Third quarter 1998 results included $88,000,000 of expenses ($.53 per share, net of tax, assuming dilution) related to the acquisition of Caliber and the formation of the Company. (5) Fourth quarter 1998 included Caliber’s results for the 13-week period from March 1,1998 to May 31,1998 consolidated with FedEx’s results for the three months ended May 31, 1998. Fourth quarter 1997 included Caliber’s results for the 16-week period from September 8, 1996 to December 31,1996 consolidated with FedEx’s results for the three months ended May 31,1997. (6) Caliber announced a major restructuring of its Viking operations on March 27, 1997. Non-recurring charges relating to the restructuring included $225,000,000 ($1.18 per share, net of tax, assuming dilution) in the fourth quarter of 1997. P 5 2 FDX CORPORATION R E P O R T O F I N D E P E N D E N T P U B L I C A C C O U N TA N T S To the Stockholders of FDX Corporation: We have audited the accompanying consolidated bal- ance sheets of FDX Corporation (a Delaware corpora- tion) and subsidiaries as of May 31, 1998 and 1997, and the related consolidated statements of income, common stockholders’ investment and cash ﬂows for each of the three years in the period ended May 31, 1998. These ﬁnancial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these ﬁnancial statements based on our audits. We did not audit the December 31, 1996, balance sheet and the related statements of income, shareholders’ equity and cash ﬂows for each of the two years in the period ended December 31, 1996, of Caliber System, Inc., a company acquired during 1998 in a transaction accounted for as a pooling of interests, as discussed in Note 1. Such statements are included in the consolidated ﬁnancial statements of FDX Corporation as of May 31, 1997, and for each of the two years in the period ended May 31,1997, and reﬂect total assets of 16 percent at May 31, 1997, and total rev- enues of 19 percent in both 1996 and 1997 of the related FDX Corporation consolidated totals. These statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to amounts included for Caliber System, Inc., is based solely upon the report of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reason- able assurance about whether the ﬁnancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the ﬁnancial statements. An audit also includes assessing the accounting princi- ples used and signiﬁcant estimates made by manage- ment, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of the other auditors, the financial statements referred to above present fairly, in all material respects, the ﬁnan- cial position of FDX Corporation as of May 31,1998 and 1997, and the results of their operations and their cash ﬂows for each of the three years in the period ended May 31, 1998, in conformity with generally accepted accounting principles. Memphis, Tennessee July 8, 1998 FDX CORPORATION P 5 3 S E L E C T E D C O N S O L I D AT E D F I N A N C I A L D A T A Years ended May 31 In thousands, except per share amounts and Other Operating Data 1998 1997 1996 1995 1994 OPERATING RESULTS Revenues Operating income Income from continuing operations before income taxes Income from continuing operations Income (loss) from $15,872,810 1,010,660 $14,237,892 507,002 $12,721,791 779,552 $11,719,596 756,247 $10,301,946 681,815 899,518 498,155 425,865 196,104 702,094 400,186 693,564 396,125 540,131 295,975 discontinued operations 4,875 — (119,614) (78,977) 27,730 Cumulative effect of accounting changes Net income PER SHARE DATA Earnings (loss) per share: Basic EPS Continuing operations Discontinued operations Cumulative effect of accounting changes Diluted EPS Continuing operations Discontinued operations Cumulative effect of accounting changes Average shares of common stock Average common and common equivalent shares Cash dividends FINANCIAL POSITION Property and equipment, net Total assets Long-term debt, less current portion Common stockholders’ investment OTHER OPERATING DATA FedEx Express package: Average daily package volume Average pounds per package Average revenue per pound Average revenue per package Airfreight: Average daily pounds Average revenue per pound Operating weekdays Aircraft ﬂeet RPS Average daily package volume Average revenue per package Operating weekdays $ $ $ $ $ — 503,030 3.40 .03 — 3.43 3.34 .03 — 3.37 146,701 $ $ $ $ $ — 196,104 1.35 — — 1.35 1.33 — — 1.33 145,713 149,204 —(1) 147,228 —(1) $ $ $ $ $ — 280,572 2.76 (.82) — 1.94 2.74 (.82) — 1.92 144,695 145,843 —(1) $ $ $ $ $ $ $ $ $ $ — 317,148 2.76 (.55) — 2.21 2.74 (.55) — 2.19 143,489 144,501 —(1) (18,131) 305,574 2.08 .20 (.13) 2.15 2.06 .20 (.13) 2.13 142,284 143,641 —(1) $ 5,935,050 9,686,060 1,385,180 3,961,230 $ 5,470,399 9,044,316 1,597,954 3,501,161 $ 4,973,948 8,088,241 1,325,277 3,312,440 $ 4,421,312 7,943,218 1,324,711 3,260,963 $ 4,042,035 7,459,007 1,632,202 2,971,856 3,025,999 8.5 1.84 15.69 2,769,922 .85 254 613 1,326,190 5.04 256 $ $ $ $ 2,715,894 7.2 2.11 15.11 2,542,226 .94 254 584 1,067,104 4.96 254 $ $ $ $ 2,437,662 6.4 2.31 14.87 2,144,225 1.01 256 557 1,043,437 4.92 252 $ $ $ $ 2,247,594 6.3 2.31 14.62 2,153,041 1.06 255 496 1,009,665 4.78 253 $ $ $ $ 1,925,105 6.0 2.51 15.12 1,844,270 1.06 257 458 854,908 4.70 252 $ $ $ $ See Note 1 to Notes to Consolidated Financial Statements for a discussion of the periods presented. (1)Caliber declared dividends of $3,899,000, $28,184,000, $54,706,000, $54,620,000 and $53,746,000 for 1998, 1997, 1996, 1995 and 1994, respectively. Caliber declared additional dividends of $10,883,000 from January 1, 1997 to May 24, 1997, that are not included in the amounts above. FedEx did not pay dividends in the years shown. FDX does not intend to pay dividends on FDX common stock. P 5 4 FDX CORPORATION B O A R D O F D I R E C T O R S A N D S E N I O R O F F I C E R S BOARD OF DIRECTORS ROBERT H. ALLEN(2) Private Investor and Managing Partner Challenge Investment Partners Investment ﬁrm ROBERT L. COX(1) Partner Waring Cox Law ﬁrm RALPH D. DENUNZIO(2) President Harbor Point Associates, Inc. Private investment and consulting ﬁrm JUDITH L. ESTRIN(1) Senior Vice President and Chief Technology Ofﬁcer Cisco Systems, Inc. Networking systems company PHILIP GREER(1*) Senior Managing Director Weiss, Peck & Greer, L.L.C. Investment management ﬁrm J.R. HYDE, III(2) President Pittco, Inc. Investment company CHARLES T. MANATT(2) Chairman Manatt, Phelps & Phillips Law ﬁrm GEORGE J. MITCHELL(1) Special Counsel Verner, Liipfert, Bernhard, McPherson and Hand Law ﬁrm JACKSON W. SMART, JR.(2*) Chairman, Executive Committee First Commonwealth, Inc. Managed dental care company FREDERICK W. SMITH Chairman, President and Chief Executive Ofﬁcer FDX Corporation DR. JOSHUA I. SMITH(1) Chairman, President and Chief Executive Ofﬁcer The MAXIMA Corporation Information and data processing ﬁrm PAUL S. WALSH(2) Chairman, President and Chief Executive Ofﬁcer The Pillsbury Company Consumer food and beverage company PETER S. WILLMOTT(1) Chairman and Chief Executive Ofﬁcer Willmott Services, Inc. Retail and consulting ﬁrm (1) Audit Committee (2) Compensation Committee (*) Committee Chairman SENIOR OFFICERS FREDERICK W. SMITH Chairman, President and Chief Executive Ofﬁcer ALAN B. GRAF, JR. Executive Vice President and Chief Financial Ofﬁcer KENNETH R. MASTERSON Executive Vice President, General Counsel and Secretary DENNIS H. JONES Executive Vice President and Chief Information Ofﬁcer T. MICHAEL GLENN Executive Vice President, Market Development and Corporate Communications FDX CORPORATION P 5 5 C O R P O R A T E I N F O R M A T I O N Stock listing: The Company’s common stock is listed on The New York Stock Exchange under the ticker symbol FDX. Stockholders: At July 15, 1998, there were 15,373 stockholders of record. Market information: Following are high and low closing prices, by quarter, for FDX Corporation common stock in ﬁscal 1998 and 1997. No cash dividends have been declared. FY 1998 High Low FY 1997 High Low First Quarter Second Quarter Third Quarter Fourth Quarter $70 53 $82 9⁄16 61 1⁄16 $69 11⁄16 56 3⁄8 $74 1⁄4 61 1⁄4 $41 9⁄16 37 1⁄16 $44 7⁄8 36 1⁄4 $53 1⁄8 40 1⁄8 $57 1⁄8 50 3⁄8 Corporate headquarters: 6075 Poplar Avenue, Suite 300, Memphis, Tennessee 38119, (901) 369-3600. Annual meeting: The annual meeting of stockholders will be held at The Memphis Marriott, 2625 Thousand Oaks Boulevard, Memphis, Tennessee, on Monday, September 28, 1998, at 10:00 a.m., CDT. Inquiries: For financial information, contact Elizabeth R. Allen, Investor Relations, FDX Corporation, Box 727, Dept. 1854, Memphis, Tennessee 38194, (901) 395-3478. For general information, contact Shirlee M. Clark, Director, Public Relations, FDX Corporation, Box 727, Dept. 1850, Memphis, Tennessee 38194, (901) 395-3460. Form 10-K: A copy of the Company’s Annual Report on Form 10-K (excluding exhibits), ﬁled with the Securities and Exchange Commission (SEC) is available free of charge. You will be mailed a copy upon request to Elizabeth R. Allen, Investor Relations, FDX Corporation, Box 727, Dept. 1854, Memphis, Tennessee 38194, (901) 395-3478. Com- pany documents filed electronically with the SEC can also be found on the Internet at the SEC’s Web site (http://www.sec.gov). Auditors: Arthur Andersen LLP, Memphis, Tennessee. Registrar and transfer agent: First Chicago Trust Company of New York, Shareholder Services, P.O. Box 2500, Jer- sey City, New Jersey 07303-2500, (800) 446-2617/John H. Ruocco (312) 407-5153. Equal Employment Opportunity: FDX Corporation is ﬁrmly committed to afford Equal Employment Opportunity to all individ- uals regardless of age, sex, race, color, religion, national origin, citizenship, disability, or status as a Vietnam era or special disabled veteran. We are strongly bound to this commitment because adherence to Equal Employment Opportunity princi- ples is the only acceptable way of life. We adhere to those principles not just because they’re the law, but because it’s the right thing to do. Service Marks: FDXSM is a service mark of FDX Corporation. Federal Express,® FedEx,® the FedEx ® logo, FedEx Interna- tional Priority® FedEx International Economy,® FedEx International Express Freight,® FedEx Express Saver® and FedEx interNetShip® are registered service marks of Federal Express Corporation. Reg. U.S. Pat. & Tm. Off. and in certain other countries. FedEx Air CharterSM and FedEx International Airport to Airport SM are service marks of Federal Express Corporation. RPS ® and the RPS® logo are registered service marks of RPS, Inc. Reg. U.S. Pat & Tm. Off. Viking FreightSM is a service mark of Viking Freight, Inc. Caliber LogisticsSM is a service mark of Caliber Logistics, Inc. Roberts Express ® is a registered service mark of Roberts Express, Inc. Reg. U.S. Pat. & Tm. Off. Portions of this annual report were printed on recycled paper. P 5 6 FDX CORPORATION m o c . n o s i d d a w w w . n o s i d d A y b n g i s e D +25 HOW TIME FLIES When Federal Express took FedEx’s 25th anniversary is incessantly, and proved that flight on April 17, 1973, it cause to celebrate not only a service company could win delivered 186 packages to the founding of an industry, the Malcolm Baldrige 25 cities. One courier sold but that the company did it National Quality Award. In his watch to buy fuel for his so well. FedEx set standards 25 years, FedEx redefined van. Others used their own for service against which service for all time. cars for deliveries. The folks every carrier is measured, in Pittsburgh did business instilled employees with a out of a motel room. Anything singular commitment to sat- to make this vision fly. isfy the customer, innovated FDX Corporation 6075 Poplar Avenue Memphis, Tennessee 38119

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