FedEx Annual Report 2001

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FY2001 Annual Report · FedEx

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FedEx Corporation 2001 Annual Report

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FedEx Corporation

Time-definite, global
express package
and freight delivery

Small-package ground
services, including
FedEx Home Delivery

Regional less-than-
truckload freight services

Exclusive-use, expedited,
door-to-door delivery

Customs brokerage and
trade facilitation solutions

Consolidated sales,
marketing and
technology support

Only FedEx could create an industry, then 28 years later, grow into so much more than an “overnight” success.

Today, only FedEx offers dedicated networks for express, ground, freight, expedited delivery and unique trade
services – when customers need greater choice and ﬂexibility in managing their supply chains.

Only FedEx delivers industry-leading, on-time service levels – when time is literally money.

Only FedEx provides the right level of information intensity – when information about the package is still as
important as delivery of the package itself.

In FY01, only FedEx had the vision to acquire American Freightways – one of the nation’s premier regional, less-
than-truckload freight carriers. With the acquisition, we formed FedEx Freight to oversee both American
Freightways and Viking Freight.

During a period of challenge and change, only FedEx remains focused on a unique business model – to operate
each company independently, focused on the distinct needs of each customer segment, but also to compete
collectively, leveraging our greatest strengths, the power of the FedEx brand and information technology.
That’s why FedEx continues to deliver value for our shareowners, meaningful solutions for our customers
and continued opportunity for our employees.

1. Financial Highlights 2. Message from the CEO 6. Message from the CFO
7. Financial Information 35. Directors 36. Ofﬁcers 37. Corporate Information

FINANCIAL HIGHLIGHTS

In thousands, except earnings per share

2001

2000

Percent Change

OPERATING RESULTS
Revenues
Operating income
Operating margin
Net income
Earnings per share, assuming dilution
Earnings per share, excluding nonrecurring items, assuming dilution(1)
Cash earnings per share, assuming dilution(2)
Average common and common equivalent shares
EBITDA(3)
Capital expenditures(4)

FINANCIAL POSITION
Total assets
Long-term debt
Common stockholders’ investment

$19,629,040
1,070,890

5.5%

$
$
$

584,371
1.99
2.26
6.34
293,179
$ 2,347,300
$ 1,893,384

$18,256,945
1,221,074

6.7%

$
$
$

688,336
2.32
2.32
6.22
296,326
$ 2,398,663
$ 1,991,600

$13,340,012
2,121,511
5,900,420

$11,527,111
1,782,790
4,785,243

+ 8
–12

–15
–14
– 3
+ 2
– 1
– 2
– 5

+16
+19
+23

(1) Nonrecurring items include primarily noncash charges of $124 million ($78 million after tax or $0.27 per diluted share) associated with the curtailing of certain aircraft modiﬁcation

and development programs and reorganizing operations at FedEx Supply Chain Services, Inc.
(2) Net income plus depreciation and amortization divided by average common equivalent shares.
(3) Represents earnings before interest, taxes, depreciation and amortization.
(4) Represents actual cash expenditures plus the equivalent amount of cash that would have been expended for the acquisition of assets (principally aircraft), whose use was

obtained through long-term operating leases entered into during the period.

REVENUES (in billions)

EARNINGS PER SHARE

RETURN ON AVERAGE EQUITY

$15.9

$16.8

$18.3

$19.6

$2.32

$2.10

$1.99

14.6%

13.5%

$1.69

10.9%

EBITDA (in billions)

(3)

CAPITAL EXPENDITURES
(4)
(in billions)

DEBT TO TOTAL
CAPITALIZATION

$2.2

$2.0

$2.4

$2.3

$2.0

$1.9

29.3%

22.8%

27.1%

26.4%

MESSAGE FROM THE CEO

DEAR FELLOW SHAREOWNERS,

The current economic downturn hit almost without warning,
leading experts from Wall Street to Main Street to search for easy
explanations. But, at FedEx, we know that a time of great chal-
lenge is also a time of great opportunity, a time to step back and
take a look at the larger perspective.

In any annual report, the consolidated ﬁnancial results capture
just one snapshot in time. But there’s a larger FedEx picture here
for ﬁscal year 2001 – a picture of solid ﬁrst-half revenue growth,
improved cash ﬂows and effective yield management.

FY01 Financial Results

To view this big picture, look behind the numbers for the full year
ended May 31, 2001, and examine the breakdowns for the ﬁrst
and second half:

• Annual revenue increased 8% to a record $19.6 billion, fueled by
ﬁrst-half revenue growth of 9%. Second-half revenue was also
above year-ago levels, but grew at a slower 6% pace.

• Net income decreased 15% to $584 million for the year, despite
a ﬁrst-half increase of 10%. In the second half, net income
dropped 38%.

• Earnings per share of $1.99 included a ﬁrst-half contribution of
$1.25, up 15% over the prior year. The second-half contribution
declined 39% causing EPS to fall 14% for the full year.

The question is clear: What happened between the ﬁrst and sec-
ond half? Certainly, the second-half numbers include one-time
charges associated with curtailing certain aircraft modiﬁcation
and development programs and reorganizing operations at FedEx
Supply Chain Services. But larger issues are also at play.

Slowing Consumer Demand

Historically, times of economic slowdown can be traced to a fun-
damental imbalance between supply and demand. Our current
economic situation is no exception.

After strong growth in consumer demand over a number of years –
particularly the demand for high-tech goods – many companies
ramped up supply only to discover that demand had dropped
sharply. In some cases, faulty business models collapsed entirely.
But the result was historically familiar – inventory oversupply led
to increased obsolescence. For FedEx companies, that translated
to softer demand for transportation and, speciﬁcally, for express
transportation tied to the high-tech and durable goods sectors.

June 5

FedEx Corp. relaunches
fedex.com to integrate express
and ground functionality.

Aug 28

FedEx Express boosts global
network with new Europe and
Asia connections.

Nov 12

FedEx Corp. agrees to acquire
American Freightways, which
will be teamed with Viking
Freight to form FedEx Freight.

2000

July 8
FedEx Express and FedEx Home
Delivery make e-commerce history
with ﬁrst-day delivery of 250,000
Harry Potter books for Amazon.com.

July 31

FedEx Custom Critical
acquires Passport
Transport.

Sept 12
FedEx Express signs a
European operational
agreement with La Poste.

Sept 18
FedEx Ground opens
Northeast Super Hub in
Woodbridge, N.J.

In the second half of this ﬁscal year, the U.S. economy fell harder
than we expected, and the domestic downturn had a ripple
effect on select international markets, particularly Asia, which
is heavily integrated into U.S. high-tech manufacturing.

It was a wild ride on the economic pendulum, swinging from the
promise of the new Digital Economy back to an Industrial Economy
in a cyclical correction. Now, we ﬁnd that pendulum moving back
toward the center as excess is wrung out of the inventory buildup
of last year and as manufacturers begin to come back into balance.

The shakeout in the “dot-com” sector and the rationalization of
a number of overbuilt sectors seem largely behind us now.

When the economy picks up – hopefully sooner rather than later –
FedEx customers can take advantage of the upturn by selecting
the right mode of transportation with the right level of informa-
tion intensity. By better managing both the supply chain and the
demand cycle, we can all manage our way back to growth in a
healthy economy.

A Fiscally Responsible FedEx

How did FedEx continue to increase revenue and yields in this
difﬁcult economy? With prudent ﬁnancial management through

pricing as well as customer and product mix. In addition, we
deferred or cut capital spending and imposed very diligent inter-
nal cost controls on travel, entertainment, outside services, new
hires and other discretionary spending. Given the slowdown in
volume, we began to “right-size” our transportation networks,
making sure that we don’t carry excess capacity any more than
our customers carry obsolete inventory.

All the while, we remained focused on the ﬁve growth strategies
that we presented to employees beginning in September 2000:

• Grow our core transportation business.
• Grow internationally.
• Grow our logistics and supply chain offerings.
• Grow through e-commerce.
• Grow through new services or alliances.

It may sound incongruous to be focused on growth during an eco-
nomic decline, but our real challenge is to respond to temporary
market corrections without sacriﬁcing long-term opportunity. One
year of soft results will not change our commitment to growth or
deter us from our goals – improving EPS by 10% to 15% per year,
increasing cash ﬂow, improving margins and increasing our return
on capital. In this regard, we will continue to manage our revenue
based not just on volume but on yield as well.

Jan 10

Feb 26

Apr 2

FedEx Express enters into two
landmark service agreements
with the U.S. Postal Service.

FedEx Express extends
shipping times for customers
in many major markets with
its FedEx Extra HoursSM service.

FedEx Express initiates an
additional China frequency, for
a total of 11 weekly ﬂights.

2001

Jan 16
FedEx Express announces plan
to become a launch customer for
Airbus A380-800F.

Feb 6
FedEx Ground extends FedEx
Home Delivery coverage to
70% of the U.S. population.

Mar 23
FedEx Ground awarded ISO
9002 registration, joining FedEx
Express and FedEx Services as
a bearer of the worldwide ISO
quality standard.

Apr 18
FedEx Ground, American
Freightways and Viking
Freight win NASSTRAC’s
Carrier of the Year Award for
their respective markets.

The Diversiﬁed FedEx Portfolio

Perhaps the most signiﬁcant difference in our response to this
economic slowdown versus the 1990–91 recession is a simple
fact: FedEx is not the same company we were then. In 1991, we
were a $7.7 billion business focused exclusively on express trans-
portation. Our international network was incomplete. While we
had made signiﬁcant investments in technology, the Internet as
we know it did not exist.

Today, FedEx has expanded and diversiﬁed its portfolio to com-
pete across a wide spectrum of the transportation market. FedEx
offers the broadest range of transportation, logistics and infor-
mation services of any company, anywhere – express, ground,
freight and even expedited delivery. And we’ve leveraged the
strength of that portfolio over the past year.

When U.S. demand for FedEx Express transportation began to
wane in the second half of last year, the FedEx Ground business
continued to grow. In February, we completed the acquisition of
American Freightways and created FedEx Freight, which over-
sees our regional less-than-truckload freight services, including
Viking Freight in the western United States. No competitor can
match the scope and breadth of our transportation services in
general and our freight offering in particular.

Our FY01 performance, even during tough economic times, con-
ﬁrms that the FedEx philosophy of operating independently and
competing collectively is working, particularly the adjustments
we made in January 2000, when we rebranded our major operat-
ing companies and reorganized to better meet customer needs.
It’s clear now that our customers are responding positively to
these strategic changes.

Strong Customer Relationships

When the Smithsonian Institution’s National Zoological Park
needed reliable delivery of two pandas from China, FedEx was the
obvious choice. When Ford Motor Company needed around-the-
clock, critical-parts support for its commercial truck customers,
FedEx won the business. Wal-Mart, Compaq, General Motors and
other valued customers have recently honored FedEx companies
as “carrier of the year.”

In January, we announced major new service agreements
between FedEx and the U.S. Postal Service. In one agreement,
FedEx Express agreed to provide air transportation for certain
Postal Service products, beginning in August 2001. The U.S. Postal
Service also agreed to the placement of FedEx Drop Boxes outside
U.S. Post Ofﬁces nationwide, beginning in March 2001.

These landmark public-private agreements create a winning busi-
ness alliance. The Postal Service wins with access to reliable,
consolidated air transportation service. FedEx was the only
transportation company with the capacity and expertise to make
that happen. FedEx wins by generating an estimated $7 billion in
revenue over the life of the seven-year contract. And the American
public wins with greater choice, ﬂexibility and convenience for
their shipping needs.

Superior FedEx Technology

One interesting byproduct of the Postal Service business alliance
is the advanced technology that will allow FedEx to scan and
read postal bar codes. It’s in keeping with our customer-focused
technology – helping our customers link seamlessly to the FedEx
system and use information to help manage their business.

The FedEx Web site (fedex.com) is one of the most renowned and
easiest to use, and we have continued to enhance our leading-
edge, Internet technology. This year alone, we relaunched the
site to integrate express and ground functionality, introduced a
powerful suite of international shipping tools called FedEx Global
Trade ManagerSM, opened the online market to small- and
medium-sized businesses with FedEx eCommerce Builder, and
announced the development of FedEx InSightSM to enhance ship-
ment visibility and control for select customers.

For over two decades, FedEx has been the industry leader in cus-
tomer automation, and now we’re moving from the desktop to the
wireless environment. FedEx was the ﬁrst transportation com-
pany to be listed on the AT&T Digital PocketNet Service, and in
the coming months we plan to expand our wireless capabilities to
improve service and productivity.

As we’ve been saying since the late 1970s, the information about
a package is just as important as the delivery of the package
itself. That’s why FedEx is dedicated to integrated transportation
and information services – so we can deliver meaningful solu-
tions for customers in today’s complex business environment.

Unsurpassed Global Reach

FedEx entered this economic slowdown as a strong, diversiﬁed
company – and we will come out even stronger. After all, we
emerged from the 1998–99 “Asian Flu” as the leader in Hong Kong,
Japan, Taiwan and Malaysia, in addition to our long-standing
No. 1 position in China, where we currently serve 190 cities with
11 weekly ﬂights.

Our two strongest international regions – Asia-Paciﬁc and
Europe – continued their growth trends during FY01. In Europe,

annual volume growth of 24% held virtually steady from ﬁrst half
to second half. In Asia, however, the economic slowdown was
apparent with 21% volume growth in the ﬁrst half, slowing to just
3% growth in the second half for an overall 12% annual growth
rate. But, to stay focused on the larger picture, remember that the
operative word internationally is “growth” – and it continues to
surpass U.S. domestic volume gains.

As we focus on maximizing our global network and moving our
product mix more toward higher-yielding FedEx International
Priority® shipments, we are also looking ahead to future inter-
national needs. In January, FedEx Express announced it intends
to acquire the Airbus A380-800F high-capacity, long-range air-
craft, taking delivery beginning in 2008. The A380 will be capable
of ﬂying directly between Asia, Europe and U.S. hubs with nearly
twice the payload of current MD11 aircraft. Also in FY01, we
added our ﬁrst converted MD10s to the domestic system, with
modiﬁcations to enhance mechanical reliability and to reconﬁg-
ure the cockpit for two crew members instead of three. Both
changes will help us run our global air system more efﬁciently
while maintaining superior, on-time service for our customers.

What Happens Next?

Over the years, we have carefully diversiﬁed across global
regions and across transportation sectors to create a strong and
growing FedEx. If there’s a secret to our success, it lies in our bal-
anced physical, information and human networks.

The FedEx physical network provides unsurpassed global reach,
serving 211 countries with the most reliable service in the industry.

The FedEx technology network enables real-time information to
help customers manage supply and demand on a global scale.

And, on a personal note, let me add that FedEx has the best
human network anywhere – a culture long recognized as a great
place to work with a passion for customer service. When I faced
heart bypass surgery in late November, I knew that this company
would continue under the leadership of the strongest manage-
ment team we’ve ever ﬁelded – and that more than 215,000 employ-
ees and contractors all around the world would always rise to any
challenge. I’d like to say, once more, a public “thank you” for the
overwhelming support that hastened my complete recovery.

It’s all about perspective. In a year when others faltered, FedEx
increased revenue, improved yield-per-package and generated a
return for our shareowners. As soon as the imbalance of supply
and demand rights itself, FedEx will leverage the strength of our
global family of companies – and the strength of our customer
relationships – not just to resume our own record of proﬁtable
growth, but to help restore growth for our customers.

Frederick W. Smith
Chairman, President and Chief Executive Ofﬁcer

MESSAGE FROM THE CFO

FedEx Corporation’s ﬁnancial performance improved signiﬁcantly
during the ﬁrst half of ﬁscal year 2001 as our new go-to-market
strategies generated volume and yield growth at FedEx Express
and FedEx Ground. The second half of the year was more ﬁnan-
cially challenging, however, as our package business was
severely impacted by a rapidly slowing economy, particularly in
the high-tech and durable goods sectors. Despite these adverse
economic conditions, we made considerable progress toward
our ﬁnancial goal of becoming cash ﬂow positive. In fact, exclud-
ing the costs associated with our acquisition of American
Freightways, we attained net cash ﬂow positive status last year
as we pursued the following strategies:

Portfolio Expansion

The acquisition of American Freightways and the formation of
FedEx Freight expanded and enhanced our already formidable
arsenal of supply chain solutions. Teamed with Viking Freight,
the largest Western regional less-than-truckload carrier,
American Freightways provides the perfect extension of our
increasingly popular less-than-truckload offering to virtually all
U.S. ZIP codes.

Yield Improvement

We continued to execute good yield management strategies in
FY01 even with a weakening economy and a slowdown in volume
growth. Package and freight yields improved as we continued
to manage our rate levels, customer diversity and volume and
freight mix. Since our yields, especially at FedEx Express, are not
quite as high as our primary competitor, we still have substantial
opportunity to leverage our industry-leading service offerings
and powerful and trusted brand to grow yields, revenues and
margins as the economy improves.

Cost Containment

We are proud that we were able to contain costs last year while
still providing the best service in the industry. Cost reduction
programs included a freeze on most hiring, substantially reduc-
ing bonus incentive compensation related to proﬁtability and
a comprehensive reduction in discretionary expenses at all
operating companies. These steps will remain in place until our
proﬁtability returns to acceptable levels.

Capital Discipline

For the third year in a row, we managed to lower our capital
expenditures as both a percentage of revenue and on an
absolute basis, while at the same time expanding our network
and improving service. Because of the sluggish growth of the
economy this past year, we thoroughly reviewed our long-term
capacity needs. As a result, we adjusted our aircraft programs to
better match capacity to customer demand as well as maximize
proﬁtability now and in the future.

The outlook for FY02 is certainly challenging, but we will con-
tinue our efforts to penetrate the small- and medium-sized
customer base, develop our new alliance with the U.S. Postal
Service, expand our FedEx Home Delivery service and promote
our new FedEx Freight network. All the while, we will remain
focused on cost containment and capital expenditure discipline
in order to achieve positive cash ﬂow. With the unmatched serv-
ice of dedicated employees and contractors worldwide, we will
continue to successfully overcome the challenges of today’s envi-
ronment and position our company for future growth and superior
margins, returns and cash ﬂows as the economy recovers.

Alan B. Graf, Jr.
Executive Vice President and Chief Financial Ofﬁcer

MANAGEMENT’S DISCUSSION AND
ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION

RESULTS OF OPERATIONS

CONSOLIDATED RESULTS

The following table compares revenues, operating income, net
income and earnings per diluted share (in millions, except for per
share amounts) for the ﬁscal years ended May 31:

Revenues
Operating income
Net income

2001
$19,629
1,071
584

2000
$18,257
1,221
688

1999
$16,773
1,163
631

Percent Change
2000/
2001/
1999
2000
+ 9
+ 8
+ 5
–12
+ 9
–15

Earnings per diluted share 1.99

2.32

2.10

–14

+10

Our results for 2001 reﬂect strong performance for the ﬁrst half of
the year, which was more than offset by the effects of weakened
economic conditions in the second half of the year. Operating
results for 2001 also reﬂect charges of $124 million ($78 million
after tax or $0.27 per diluted share) primarily related to noncash
asset impairment charges at FedEx Express.

Revenue growth in 2001 included, among other things, the effects
of the acquisition of American Freightways, which added approxi-
mately $630 million to 2001 revenues. Excluding the effects of
business acquisitions in both years, revenues increased 3% for
2001. This increase is largely due to the continued revenue
growth of FedEx Express International Priority (IP) packages,
although at a lower rate than that experienced in 2000. Despite
the negative economic effects on demand in the last half of the
year, double-digit volume growth rates during 2001 were experi-
enced in the European and Asian markets. U.S. domestic package
volume at FedEx Express declined slightly from 2000. Volume
growth was slightly higher than 2000 at FedEx Ground, as this
subsidiary continued to grow its core business and expand its
FedEx Home Delivery service offering.

Effective February 1, 2001, FedEx Express implemented list rate
increases averaging 4.9% for shipments within the U.S. and 2.9%
for U.S. export shipments. FedEx Ground also implemented a list
rate increase of 3.1% on February 5, 2001. Increased product rev-
enue per package (yield) for 2001 for most services included the
effects of these rate increases, the effects of fuel surcharges and
other yield-management strategies, including a sales focus on
higher yielding business. These revenue increases were partially
offset by a decrease in other revenues, primarily decreased sales
of engine noise reduction kits (hushkits) at FedEx Express.

As a result of sharply lower domestic volumes at FedEx Express
in the second half of 2001 and lowered growth forecasts, man-
agement committed to eliminate certain excess aircraft capacity
related to our MD10 program. The MD10 program upgrades and
modiﬁes our older DC10 aircraft to make them more compatible
with our newer MD11 aircraft. By curtailing the MD10 program,
we will avoid approximately $1.1 billion of future capital expendi-
tures over the next seven years. In addition, due to the bank-
ruptcy of Ayres Corporation, we expensed deposits and related
items in connection with the Ayres ALM 200 aircraft program. We
also took actions to reorganize our FedEx Supply Chain Services
subsidiary to eliminate certain unproﬁtable, nonstrategic logistics
business and reduce its overhead. Following is a summary of
these principally noncash charges (in millions) taken in the fourth
quarter of 2001:

Impairment of certain assets related to the MD10 aircraft program $ 93
22
Strategic realignment of logistics subsidiary
9
Ayres program
$124
Total

In addition to the actions described above, we took other meas-
ures during 2001, such as reducing variable compensation pro-
grams, limiting stafﬁng additions and lowering discretionary
spending, in an effort to better match our cost structure and
capacity to current business volumes.

Excluding the above charges and the effect of business acquisi-
tions, operating income decreased 5% in 2001. Incremental
losses from the continued expansion of our FedEx Ground Home
Delivery service negatively affected operating income by $34 mil-
lion in 2001.

Operating results also reﬂect the continuing implementation
of the rebranding and reorganization initiatives begun in 2000.
The sales, marketing and most of the information technology
functions of our two largest subsidiaries are now centralized in
FedEx Services. We have substantially completed the expansion
and retraining of our sales force, but continue to incur costs
associated with the retooling of our automation systems and
vehicle and facilities rebranding. These costs were approximately
$26 million for 2001.

Increased fuel prices negatively impacted year-over-year
expenses by approximately $160 million for 2001, net of the effects
of jet fuel hedging contracts. In response to higher fuel costs,
fuel surcharges have been implemented at all of our transpor-
tation subsidiaries, including a 1.25% fuel surcharge that was

Management’s Discussion and Analysis

implemented at FedEx Ground on August 7, 2000 and a 4% fuel
surcharge, implemented in 2000, that was in place at FedEx
Express throughout 2001. These surcharges offset the impact of
higher fuel costs in 2001.

and improve ﬁnancial returns. FedEx Home Delivery also was
launched in March 2000. The rebranding and reorganization actions
and FedEx Home Delivery negatively affected 2000 operating
income by approximately $21 million and $19 million, respectively.

We received approximately $92 million in 2001 under jet fuel hedg-
ing contracts. Due to slightly moderating fuel prices and the con-
tinuation of our fuel surcharge program, we effectively closed
our hedge positions by entering into offsetting jet fuel hedging
contracts during the fourth quarter of 2001. We may, however,
enter into jet fuel hedging contracts in the future.

During 2001, we formed a new segment specializing in the
regional less-than-truckload (“LTL”) ground transportation of
freight. FedEx Freight was formed in the third quarter of 2001 in
connection with the acquisition of American Freightways. The
acquisition was accounted for as a purchase and resulted in the
recognition of approximately $600 million in goodwill. FedEx
Freight also includes Viking. The acquisition of American
Freightways was slightly accretive to 2001 earnings per diluted
share. For further information regarding the acquisition, see
“Liquidity” and Note 2 to our ﬁnancial statements.

Our compensation programs include substantial cash incentive
plans, which are based on ﬁnancial and operating performance.
Results for 2001 included a reduction in operating costs related
to such plans. Costs for pension and postretirement beneﬁt pro-
grams were approximately $70 million lower, due principally to
higher discount rates and improved asset performance in 2000.

As expected, operating proﬁt from the sale of hushkits declined
$40 million in 2001 to $8 million, following a decline of $50 million
in 2000.

For 2000, operating results reﬂected strong international volume
and yield growth. However, U.S. domestic package volume growth
was below that experienced in 1999. Signiﬁcantly higher fuel
prices resulted in an increase in fuel expense of $273 million, net
of $18 million received under jet fuel hedging contracts. On
February 1, 2000, management implemented a 3% fuel surcharge at
FedEx Express in response to the higher fuel costs. Effective
April 1, 2000, the surcharge was increased to 4%. In the last half of
2000, we began the major rebranding and reorganization initiative
of centralizing certain functions in order to enhance revenue growth

Operating results for 1999 included $81 million in operating
expenses associated with strike contingency planning during
contract negotiations between FedEx Express and the Fedex
Pilots Association (“FPA”). To avoid service interruptions related
to a threatened strike, we began strike contingency planning,
including entering into agreements for additional third-party air
and ground transportation and establishing special ﬁnancing
arrangements. Negotiations with the FPA ultimately resulted in a
ﬁve-year collective bargaining agreement that took effect on
May 31, 1999.

Other Income and Expense and Income Taxes

For 2001, net interest expense increased 36% due to higher bor-
rowings that were primarily incurred as a result of the prior year
stock repurchase program and additional debt incurred for the
American Freightways acquisition. Net interest expense
increased 8% for 2000, due to higher average debt levels, pri-
marily incurred as a result of our stock repurchase program, busi-
ness acquisitions and bond redemptions.

Other, net in 2000 included gains of approximately $12 million from
an insurance settlement for a destroyed MD11 aircraft and
approximately $11 million from the sale of securities.

Our effective tax rate was 37.0% in 2001, 39.5% in 2000 and 40.5%
in 1999. The 37.0% effective tax rate in 2001 was lower than the
2000 effective rate primarily due to the utilization of excess for-
eign tax credits. Generally, the effective tax rate exceeds the
statutory U.S. federal tax rate because of state income taxes and
other factors as identiﬁed in Note 9 to our ﬁnancial statements.
For 2002, we expect the effective tax rate to be in the approximate
range of 38.0% to 39.0%.

Outlook

Although management believes that the current economic down-
turn is largely cyclical, we expect it to persist at least through the
ﬁrst half of 2002. We plan to align capital spending with operating

FedEx Corporation

cash ﬂow, continue strict controls over discretionary spending
and implement other measures to reduce commitments for lift
capacity in excess of our needs (see “FedEx Express – Outlook”).

Cash incentive programs for 2002 have been substantially
reduced for most employees, including all members of senior
management, and these programs will begin to pay out only if we
exceed our 2002 ﬁnancial targets. However, anticipated reduc-
tions in 2002 incentive costs are expected to be offset by higher
pension expense resulting from changes in discount rates and
unrealized market declines in pension assets.

Despite the near-term economic outlook, we continue to believe
that we are well positioned for long-term growth. In January 2001,
FedEx Express entered into a business alliance with the U.S.
Postal Service, which is expected to generate revenue of approx-
imately $7 billion over seven years and is consistent with our
goals of improving margins, cash ﬂows and returns. The alliance
consists of two service agreements. In the ﬁrst nonexclusive
agreement, FedEx Express will install drop boxes at U.S. Post
Ofﬁces, and in the second agreement, FedEx Express will provide
airport-to-airport transportation of Priority, Express and First
Class Mail. On June 18, 2001, we ofﬁcially launched the national
rollout of FedEx Drop Boxes at post ofﬁces throughout the coun-
try, implementing the ﬁrst of these service agreements. FedEx
Express is scheduled to begin the agreement for air transporta-
tion in late August 2001. In 2002, we will also continue the busi-
ness alliance in Europe with La Poste, established in 2001.

The acquisition of American Freightways substantially enhanced
our overall transportation portfolio by enabling us to offer a
regional LTL service virtually everywhere in the United States.
During 2002, we will focus on increasing volumes and yields in
our core high-quality next- and second-day regional freight serv-
ices. In addition, we will continue to expand our FedEx Home
Delivery network and will continue to pursue new service and
business opportunities, such as those mentioned above, in sup-
port of our long-term growth goals.

Actual results for 2002 will depend upon a number of factors,
including the extent and duration of the current economic down-
turn, our ability to match capacity with volume levels and our abil-
ity to effectively implement our new service and growth initiatives.
See “Forward-Looking Statements” for a more complete descrip-
tion of potential risks and uncertainties that could affect our
future performance.

Recent Accounting Pronouncements

We adopted Statement of Financial Accounting Standards
No. (“SFAS”) 133, “Accounting for Derivative Instruments and
Hedging Activities” (as amended by SFAS 137 and SFAS 138) at
the beginning of 2002. The adoption of this Statement will not
have a material effect on our ﬁnancial position or results of oper-
ations for 2002. Because of our previously mentioned fourth quar-
ter 2001 actions regarding jet fuel hedging contracts, none of the
jet fuel hedging contracts held at May 31, 2001 qualify for hedge
accounting treatment. However, our usual jet fuel hedging pro-
gram does qualify for cash ﬂow hedge accounting treatment
under which changes in the fair market value of these contracts
are recorded to Accumulated Other Comprehensive Income.

During July 2001, SFAS 142, “Goodwill and Other Intangible
Assets” was issued by the Financial Accounting Standards
Board. Under SFAS 142, goodwill amortization ceases when the
new standard is adopted. The new rules also require an initial
goodwill impairment assessment in the year of adoption and
annual impairment tests thereafter. We are permitted under the
rules to adopt this Statement effective June 1, 2001 or defer
adoption until June 1, 2002. Once adopted, goodwill amortization
of approximately $36 million on an annualized basis will cease.
We have not yet determined if any impairment charges will result
from the adoption of this Statement. At this time, we anticipate
the adoption of these rules, effective as of June 1, 2001.

REPORTABLE SEGMENTS

The formation of FedEx Services, effective June 1, 2000, changed
the way certain costs are captured and allocated between our
operating segments. For example, salaries, wages and beneﬁts,
depreciation and other costs for the sales, marketing and infor-
mation technology departments previously incurred at FedEx
Express and FedEx Ground are now allocated to these operating
segments and are included in the line item “Intercompany
charges” on the accompanying ﬁnancial summaries of our
reportable segments. Consequently, certain segment expense
data presented is not comparable to prior periods. We believe the
total amounts allocated to the business segments reasonably
reﬂect the cost of providing such services.

Management’s Discussion and Analysis

FEDEX EXPRESS

The following table compares revenues and operating income (in millions) and selected statistics (in thousands, except dollar amounts)
for the years ended May 31:

2001

2000(1)

1999(1)

Percent Change
2000/
2001/
1999
2000

2001

2000

1999

Percent Change
2000/
2001/
1999
2000

Revenues:
Package:

U.S. overnight box(2)
U.S. overnight envelope(3) 1,871
U.S. deferred
2,492

$ 5,830 $ 5,684 $ 5,409
1,776
1,854
2,271
2,428

Total domestic

International Priority (IP)

package revenue

10,193
3,940
Total package revenue 14,133

9,966
3,552
13,518

9,456
3,019
12,475

Freight:
U.S.
International

Total freight revenue

Other

Total revenues

Operating expenses:

Salaries and employee

651
424
1,075
326

440
531
971
533
$15,534 $15,068 $13,979

566
492
1,058
492

beneﬁts

Purchased transportation
Rentals and landing fees
Depreciation and
amortization

Fuel
Maintenance and repairs
Intercompany charges
Other(4)

6,301
584
1,419

797
1,063
968
1,317
2,238

Total operating
expenses

Operating income

14,687
$

847 $

14,168

900 $

13,108
871

+ 3
+ 1
+ 3

+ 2
+11
+ 5

+15
–14
+ 2
–34
+ 3

+ 5
+ 4
+ 7

+ 5
+18
+ 8

+29
– 7
+ 9
– 8
+ 8

+ 4
– 6

+ 8
+ 3

Package:

Average daily packages:
U.S. overnight box
1,264
U.S. overnight envelope 757
U.S. deferred
899

Total domestic
packages

Total packages

2,920
346
3,266

1,249
771
916

2,936
319
3,255

1,207
750
894

2,851
282
3,133

Revenue per package (yield):
U.S. overnight box
U.S. overnight
envelope
U.S. deferred
Domestic

composite

Composite

Freight:

Average daily pounds:

$18.09

$17.70

$17.51

9.69
10.87

13.69
44.70
16.97

9.36
10.31

13.21
43.36
16.16

9.24
9.93

12.96
41.87
15.56

U.S.
International

Total freight

4,337
2,208
6,545

4,693
2,420
7,113

4,332
2,633
6,965

Revenue per pound (yield):

U.S.
International
Composite

$ .59
.75
.64

$ .47
.79
.58

$ .40
.79
.54

+ 1
– 2
– 2

– 1
+ 8
–

+ 2

+ 4
+ 5

+ 4
+ 3
+ 5

– 8
– 9
– 8

+26
– 5
+10

+ 3
+ 3
+ 3

+ 3
+13
+ 4

+ 1

+ 1
+ 4

+ 2
+ 4
+ 4

+ 8
– 8
+ 2

+18
–
+ 7

(1) Operating expense detail for 2000 and 1999 has been omitted, as this data is not

comparable to 2001. See “Reportable Segments” above.

(2) The U.S. overnight box category includes packages exceeding 8 ounces in weight.
(3) The U.S. overnight envelope category includes envelopes weighing 8 ounces or less.
(4) Includes $93 million charge for impairment of certain assets related to the MD10 air-

craft program and $9 million charge related to the Ayres aircraft program.

FedEx Corporation

Revenues

Total package revenue increased 5% for 2001, principally due to
increases in yields and IP volumes, partially offset by a decrease
in other revenue. Total package yield increased 5% as a result of
our continued yield management strategy, which includes limiting
growth of less proﬁtable business and recovering the higher cost
of fuel through a fuel surcharge. The February 2001 domestic rate
increases also contributed to the higher yield.

While the IP volume growth rate was 8% for 2001, this rate was
signiﬁcantly impacted by weakness in the Asian economy in the
last half of the year. Average daily volumes for that region have
slowed from a 26% year-over-year growth rate in the ﬁrst quarter
of 2001 to a 1% year-over-year decline in the fourth quarter of
2001. For the year, FedEx Express experienced IP average daily
volume growth rates of 24% and 12% in the European and Asian
markets, respectively. In the U.S., average daily domestic pack-
age volume declined 1% year over year due to the economic soft-
ness experienced in the last half of 2001.

Total freight revenue increased slightly in 2001 due to signiﬁcantly
improved yields in U.S. freight, partially offset by declines in
domestic freight volume and international freight volume and yield.

Other revenue included Canadian domestic revenue, charter
services, logistics services, sales of hushkits and other. As
expected, revenue from hushkit sales, which has continued to
decline over the past few years, was negligible in 2001.

In 2000, total package revenue for FedEx Express increased 8%,
principally due to increases in international package volume and
yield. List price increases, including an average 2.8% domestic
rate increase in March 1999, the fuel surcharges implemented in
the second half of the year, an ongoing yield management pro-
gram and a slight increase in average weight per package, all
contributed to the increases in yields in 2000. While growth in
U.S. domestic package volume was lower than anticipated, the
higher-yielding IP services experienced strong growth, par-
ticularly in Asia and Europe. Total freight revenue increased
in 2000 due to higher average daily pounds and improved yields
in U.S. freight, offset by declines in international freight pounds.

Operating Income

Excluding the fourth quarter charges related to aircraft, FedEx
Express operating income increased 6% in 2001, despite the
slowdown in revenue growth. Increased fuel expense reﬂects

a 17% increase in average jet fuel price per gallon, which con-
tributed to a negative impact of approximately $150 million,
including the results of jet fuel hedging contracts entered into to
mitigate some of the increased jet fuel costs. The effect of higher
fuel costs on operating income was fully offset by a 4% fuel sur-
charge, in effect since April 1, 2000. Operating income was favor-
ably affected by reduced variable compensation and pension
costs, coupled with intensiﬁed cost controls over discretionary
spending. The decrease in maintenance and repairs expense pri-
marily reﬂects fewer aircraft engine maintenance events due to
the timing of scheduled maintenance and favorable negotiated
rates with vendors.

Operating income increased 3% in 2000 despite higher fuel costs
and costs associated with the corporate realignment and reor-
ganization of the sales, marketing and information technology
functions. A 48% increase in average fuel price per gallon had a
negative impact of approximately $260 million on 2000 fuel costs,
including the results of jet fuel hedging contracts entered into to
mitigate some of the increased jet fuel costs. Fuel surcharges
implemented during 2000 partially offset the increase in 2000 fuel
costs. Maintenance and repairs increased in 2000 due to the tim-
ing of scheduled maintenance and a greater number of routine
cycle checks resulting from ﬂeet usage and certain Federal
Aviation Administration directives.

Operating income in 1999 was negatively impacted by $81 million
in strike contingency costs and weakness in Asian markets.

Year-over-year comparisons were also affected by declining con-
tributions from sales of hushkits. Operating proﬁt from these
sales declined $40 million in 2001 and $50 million in 2000.

Outlook

For 2002, U.S. domestic package volumes are expected to decline
slightly. We believe that IP package volumes will grow at approxi-
mately the same rate as 2001. New services, including the U.S.
Postal Service agreements, are expected to increase revenues
in 2002.

Operating margin for this segment is expected to decrease in
2002 (excluding the 2001 charges related to aircraft programs), as
increased pension and health care costs, costs associated with
new services and annual wage increases are not expected to be
completely offset by suspension of variable compensation pro-
grams and reductions in discretionary spending.

Management’s Discussion and Analysis

Because of substantial lead times associated with the manufac-
ture or modiﬁcation of aircraft, we must generally plan our aircraft
orders or modiﬁcations three to eight years in advance. Therefore,
we must make projections regarding our needed airlift capacity
many years before the aircraft is actually needed. Our past projec-
tions included assumptions of volume growth that have not mate-
rialized and, in light of current economic projections, are not
expected to do so in the near future. Therefore, we will continue to
evaluate further reductions in aircraft programs in order to ration-
alize available capacity with current and anticipated business vol-
umes where it is economically practicable to do so.

FEDEX GROUND

The following table compares revenues and operating income (in
millions) and selected package statistics (in thousands, except
dollar amounts) for the years ended May 31:

2001
$2,237

2000(1)

1999(1)

$2,033

$1,878

Percent Change
2000/
2001/
1999
2000
+ 8
+10

Revenues
Operating expenses:

Salaries and employee

beneﬁts

Purchased transportation
Rentals and landing fees
Depreciation and
amortization

Fuel
Maintenance and repairs
Intercompany charges
Other

450
881
67

111
8
63
215
267

Total operating
expenses

2,062
Operating income
$ 175
Average daily packages
1,520
Revenue per package (yield) $ 5.79

1,807
$ 226
1,442
$ 5.55

1,647
$ 231
1,385
$ 5.36

+14
–23
+ 5
+ 4

+10
– 2
+ 4
+ 4

(1) Operating expense detail for 2000 and 1999 has been omitted, as this data is not

comparable to 2001. See “Reportable Segments” above.

Revenues

FedEx Ground revenues increased 10% in 2001 due to increases in
volume and yield. The year-over-year increase in average daily
packages of 5% represents positive volume growth experienced
in all major sectors served by FedEx Ground, including our FedEx
Home Delivery service. The 4% year-over-year yield increase was
primarily due to the February 2001 list rate increase of 3.1%, the
1.25% fuel surcharge imposed in August 2000 and ongoing yield
management efforts.

Revenues for FedEx Ground increased 8% in 2000, while average
daily packages increased 4% and yields increased 4%. The
increase in yields was due to a 2.3% price increase, which was
effective in February 1999, and a slight increase in the mix of
higher yielding packages.

Operating Income

The 2001 year-over-year decrease in operating income of 23%
was primarily due to incremental FedEx Home Delivery operating
losses and rebranding and reorganization expenses, which
totaled $45 million. Excluding the negative effect of this amount,
operating income decreased 2% from 2000. Facility openings and
expansions, as well as increased investments in information
systems, resulted in increased depreciation, rental and other
property-related expenses.

Operating income for 2000 reﬂected higher operating costs than
1999, due primarily to increases in capacity and technology, as
well as the effects of FedEx Home Delivery and the rebranding
and reorganization initiatives. Depreciation expense increased
20% in 2000 as new terminal facilities were opened late in 1999
and throughout the ﬁrst half of 2000. The FedEx Home Delivery
service, dedicated to meeting the needs of business-to-consumer
shippers, was launched in March 2000. An operating loss of
$19 million was incurred by the home delivery service in 2000.

Outlook

FedEx Ground will continue expansion of the FedEx Home Delivery
network to serve an estimated 80% of the U.S. population by
September 2001. Revenues and volumes for this service are
expected to continue to grow as the network is expanded and the
service becomes available in additional markets. In addition to uti-
lizing 2002 capital for expansion, FedEx Ground will also implement
and improve information systems in order to increase productivity.

We expect to incur an operating loss for the home delivery service
in 2002 that is approximately the same as that experienced in
2001, primarily due to continued network expansion costs and
inclusion of a full year for the terminals that opened during 2001.
FedEx Ground will also continue to incur vehicle rebranding costs,
although these expenses are expected to be slightly lower than
the 2001 level.

FEDEX FREIGHT

The FedEx Freight segment, formed in the third quarter of 2001,
includes the ﬁnancial results of Viking from December 1, 2000, and
the ﬁnancial results of American Freightways from January 1, 2001
(the date of acquisition for ﬁnancial reporting purposes).

FedEx Corporation

The following table shows revenues and operating income (in mil-
lions) and selected statistics for the year ended May 31:

Revenues
Operating expenses:

Salaries and employee beneﬁts
Purchased transportation
Rentals and landing fees
Depreciation and amortization
Fuel
Maintenance and repairs
Intercompany charges
Other

Total operating expenses

Operating income
Shipments per day(1)
Weight per shipment (lbs)(1)
Revenue per hundredweight(1)

2001
$ 835

489
23
27
44
41
39
1
116
780
$
55
56,012
1,132
$11.83

(1) Based on portion of the year including both American Freightways and Viking

(January through May).

Operating Results

FedEx Freight has experienced lower than expected volumes
since formation of the segment in third quarter 2001, due to the
economic slowdown. The lower than expected volumes were
partially offset by strong yields. The complementary geographic
regions served by American Freightways and Viking are expected
to have a positive impact on results of operations for this segment.
Both companies will continue to focus on day-deﬁnite regional
LTL service, but will also collaborate as partners to serve cus-
tomers who have multiregional LTL needs. On July 10, 2001, FedEx
Freight announced a general rate increase of 5.9% to be effective
August 6, 2001.

Fuel surcharges for this segment included the following at
May 31, 2001:

Operating
Subsidiary
American Freightways
Viking

Shipments
Under
20,000 pounds
3%
3%

Shipments
Equal to or Over
20,000 pounds
7%
6%

The American Freightways fuel surcharge, which was in effect at
the time of the acquisition, is tied to the “Retail on Highway Diesel
Fuel Price” as published by the U.S. Department of Energy and
changes weekly based on changes in the index. A fuel surcharge
has been in effect at Viking since August 16, 1999. The Viking fuel
surcharge on shipments equal to or over 20,000 pounds was
increased to 7% effective June 4, 2001.

Outlook

In 2002, FedEx Freight will seek to improve yield, volume and margins
by capitalizing on its excellent geographic coverage and by provid-
ing superior on-time performance. FedEx Freight will continue to
pursue synergies, such as leveraging information technology capa-
bilities between American Freightways and Viking in order to
improve cost structure, service and customer satisfaction levels.

OTHER OPERATIONS

Other operations include FedEx Custom Critical, a critical-shipment
carrier; FedEx Trade Networks, a global trade services company;
FedEx Supply Chain Services, a contract logistics provider; and
certain unallocated corporate items. The operating results of Viking
prior to December 1, 2000, are also included in this category.

Revenues

Revenues from other operations were $1 billion, $1.2 billion and
$.9 billion in 2001, 2000 and 1999, respectively. Excluding the
effects of businesses acquired during the comparable periods
and the revenues of Viking, revenues from other operations
decreased 11% in 2001, principally due to lower year-over-year
revenues at FedEx Custom Critical. The demand for services pro-
vided by this operating subsidiary (critical shipments) is highly
elastic and tied to key economic indicators, principally in the
automotive industry, where volumes have continued to decline
since the beginning of 2001.

The increase in other revenues from 1999 to 2000 was 15%,
excluding the effects of businesses acquired in 2000, due to sub-
stantially higher revenues at FedEx Custom Critical combined
with double-digit revenue growth at Viking.

Operating Income

Operating income (loss) from other operations was ($6.7) million,
$95.7 million and $60.6 million in 2001, 2000 and 1999, respectively.
Operating income in 2001 decreased 150%, excluding the effects
of businesses acquired during the comparable periods and the
operations of Viking. The decrease reﬂects the effect of the eco-
nomic slowdown on FedEx Custom Critical and FedEx Supply
Chain Services and costs associated with the reorganization of
FedEx Supply Chain Services.

Increased operating income for 2000 was due to strong earn-
ings at Viking and continued earnings growth at FedEx Custom
Critical. Results for 2000 also included a $10 million favorable
adjustment related to estimated future lease costs from the 1997
Viking restructuring.

Management’s Discussion and Analysis

Outlook

In 2002, we will continue the strategic realignment of FedEx Supply
Chain Services. The new FedEx Supply Chain Services business
model includes substantially less emphasis on warehousing activi-
ties and an increased focus on alliance-based and information
technology-sensitive business. The new business model is more
consistent with management’s strategy for this operating sub-
sidiary, which is to pursue business that enhances the services
offered by other operating companies in the FedEx family.

FINANCIAL CONDITION

LIQUIDITY

Cash and cash equivalents totaled $121 million at May 31, 2001,
compared to $68 million at May 31, 2000. Cash ﬂows from operat-
ing activities during 2001 totaled $2.0 billion, compared to $1.6 bil-
lion for 2000 and $1.8 billion for 1999.

Because we incur signiﬁcant noncash charges, including depre-
ciation and amortization, related to the material capital assets
utilized in our business, we believe that the following cash-based
measures are useful to us and to our investors as an additional
means of evaluating our ﬁnancial condition. These measures
should not be considered as a superior alternative to net income,
operating income or cash from operations, or to any other operat-
ing or liquidity performance measure as deﬁned by generally
accepted accounting principles.

FedEx’s operations have generated increased cash earnings per
share over the past three years. The following table compares
cash earnings (in billions, except per share amounts) for the
years ended May 31:

EBITDA (earnings before interest, taxes,
depreciation and amortization)
Cash earnings per share (net income

plus depreciation and amortization
divided by average common and
common equivalent shares)

2001

$ 2.3

2000

1999

$ 2.4

$ 2.2

$6.34

$6.22

$5.54

We have a $1.0 billion revolving credit facility that is generally
used to ﬁnance temporary operating cash requirements and to
provide support for the issuance of commercial paper. As of
May 31, 2001, the entire credit facility remained available and no
commercial paper was outstanding. For more information regard-
ing the credit facility, see Note 4 to our ﬁnancial statements.

During 2001, we acquired American Freightways in a transaction
accounted for as a purchase. The $978 million purchase price
was a combination of cash and FedEx common stock (11.0 million
shares of treasury stock were utilized). We also assumed approx-
imately $240 million in American Freightways debt.

On February 12, 2001, we issued $750 million of senior unsecured
notes in three maturity tranches: three, ﬁve and ten years, at
$250 million each. Net proceeds from the borrowings were used
to repay indebtedness, principally borrowings under our commer-
cial paper program, and for general corporate purposes. These
notes are guaranteed by all of our subsidiaries that are not con-
sidered minor under Securities and Exchange Commission
(“SEC”) regulations. For more information regarding debt instru-
ments, see Notes 1 and 4 to our ﬁnancial statements.

During 2002, certain existing debt at FedEx Express will mature,
principally $175 million of 9.875% Senior Notes due April 1, 2002.
These notes and the other scheduled 2002 debt payments are
reﬂected in the current portion of long-term debt at May 31, 2001.

In 1999, we ﬁled a $1 billion shelf registration statement with the
SEC, indicating that we may issue up to that amount in one or
more offerings of either unsecured debt securities, preferred
stock or common stock, or a combination of such instruments.
We may, at our option, direct FedEx Express to issue guarantees
of the debt securities.

We believe that cash ﬂow from operations, our commercial paper
program and revolving bank credit facility will adequately meet
our working capital needs for the foreseeable future.

CAPITAL RESOURCES

As mentioned previously, our operations are capital intensive,
characterized by signiﬁcant investments in aircraft, vehicles,
computer and telecommunications equipment, package-handling
facilities and sort equipment. The amount and timing of capital
additions depend on various factors, including volume growth,
domestic and international economic conditions, new or enhanced
services, geographical expansion of services, competition, avail-
ability of satisfactory ﬁnancing and actions of regulatory authorities.

FedEx Corporation

The following table compares capital expenditures (including
equivalent capital, which is deﬁned below) for the years ended
May 31 (in millions):

Aircraft and related equipment
Facilities and sort equipment
Information and technology equipment
Other equipment

Total capital expenditures
Equivalent capital, principally

aircraft-related
Total

2001
$ 756
353
406
378
1,893

–
$1,893

2000
$ 469
437
378
343
1,627

365
$1,992

1999
$ 606
466
366
332
1,770

561
$2,331

We ﬁnance a signiﬁcant amount of aircraft and certain other
equipment needs using long-term operating leases. We believe
the determination to lease versus buy equipment is a ﬁnancing
decision, and both forms of ﬁnancing are considered when evalu-
ating the resources committed for capital. The amount we would
have expended to purchase these assets had we not chosen to
obtain their use through operating leases is considered equiva-
lent capital in the table above. Capital expenditures (including
equivalent capital) over the past two years have been reduced in
response to lower U.S. domestic volume growth at FedEx Express.
This trend of lower U.S. domestic volume growth, along with the
current year economic slowdown and its effects on IP volume
growth, has resulted in future excess airlift capacity. During the
fourth quarter of 2001, we began the process of reducing certain
planned aircraft programs, which is expected to result in lower
capital expenditures in future periods (see Note 15 to our ﬁnan-
cial statements). For 2002, we expect capital spending, including
equivalent capital, to approximate the level of 2001 capital
expenditures. We plan to continue to make strategic capital
investments, particularly in information technology and ground
network expansion, in support of our long-term growth goals. For
information on our purchase commitments, see Note 13 to our
ﬁnancial statements.

We have historically ﬁnanced our capital investments through the
use of lease, debt and equity ﬁnancing in addition to the use of
internally generated cash from operations. Generally, our 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. We have
determined that these operating leases have provided economic
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 pursued to ﬁnance aircraft acquisitions

when we determine that it best meets our needs. Historically, we
have been successful in obtaining investment capital, both
domestic and international, for long-term leases on acceptable
terms, although the marketplace for such capital can become
restricted depending on a variety of economic factors beyond our
control. See Note 4 to our ﬁnancial statements for additional infor-
mation concerning our debt facilities.

We believe the capital resources available to us provide ﬂexi-
bility to access the most efﬁcient markets for ﬁnancing capital
acquisitions, including aircraft, and are adequate for our future
capital needs.

MARKET RISK SENSITIVE INSTRUMENTS AND POSITIONS

While we currently have market risk sensitive instruments related
to interest rates, we have no signiﬁcant exposure to changing
interest rates on our long-term debt because the interest rates
are ﬁxed. As disclosed in Note 4 to our ﬁnancial statements, we
have outstanding long-term debt (exclusive of capital leases) of
$1.9 billion and $1.1 billion at May 31, 2001 and 2000, respectively.
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 mil-
lion as of May 31, 2001 ($54 million as of May 31, 2000). The under-
lying fair values of our long-term debt were estimated based on
quoted market prices or on the current rates offered for debt with
similar terms and maturities. Presently, derivative instruments are
not used to manage interest rate risk.

Our earnings are affected by ﬂuctuations in the value of the
U.S. dollar compared to foreign currencies as a result of trans-
actions in foreign markets. At May 31, 2001, the result of a uniform
10% strengthening in the value of the dollar relative to the curren-
cies in which our transactions are denominated would result in a
decrease in operating income of approximately $70 million for the
year ending May 31, 2002 (the comparable amount in the prior year
was approximately $50 million). This calculation assumes that
each exchange rate would change in the same direction relative
to the U.S. dollar. In practice, our experience is that exchange
rates in the principal foreign markets where we have foreign cur-
rency denominated transactions tend to have offsetting ﬂuctua-
tions. Therefore, the calculation above is not indicative of our
actual experience in foreign currency transactions. In addition to
the direct effects of changes in exchange rates, which are a
changed dollar value of the resulting reported operating results,
changes in exchange rates also affect the volume of sales or the

Management’s Discussion and Analysis

foreign currency sales price as competitors’ services become
more or less attractive. The sensitivity analysis of the effects of
changes in foreign currency exchange rates does not factor in
a potential change in sales levels or local currency prices.

Our earnings are also affected by ﬂuctuations in jet fuel prices.
Market risk for jet fuel is estimated as the potential decrease in
earnings resulting from a hypothetical 10% increase in projected
jet fuel prices applied to projected 2002 usage and amounts
to approximately $100 million as of May 31, 2001, compared with
approximately $50 million, net of hedging settlements, as of
May 31, 2000. Because we also use fuel surcharges to adjust our
pricing in response to changes in fuel costs, the calculations
above are not necessarily indicative of the impact of changing
fuel prices on our earnings. As of May 31, 2001, all outstanding jet
fuel hedging contracts were effectively closed by entering into
offsetting jet fuel hedging contracts. See Notes 1 and 13 to our
ﬁnancial statements for accounting policy and additional infor-
mation regarding jet fuel hedging contracts.

We do not purchase or hold any material derivative ﬁnancial
instruments for trading purposes.

EURO CURRENCY CONVERSION

Since the beginning of the European Union’s transition to the euro
on January 1, 1999, our subsidiaries have been prepared to quote
rates to customers, generate billings and accept payments in
both euro and legacy currencies. The legacy currencies will remain
legal tender through December 31, 2001. We believe the introduc-
tion of the euro, any price transparency brought about by its
introduction and the phasing out of the legacy currencies will not
have a material impact on our consolidated ﬁnancial position,
results of operations or cash ﬂows. Costs associated with the
euro project are being expensed as incurred and are being
funded entirely by internal cash ﬂows.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this report are “forward-looking
statements” within the meaning of the Private Securities
Litigation Reform Act of 1995, such as statements relating to man-
agement’s views with respect to future events and ﬁnancial per-
formance. Such forward-looking statements are subject to risks,

uncertainties and other factors that could cause actual results to
differ materially from historical experience or from future results
expressed or implied by such forward-looking statements.
Accordingly, a forward-looking statement is not a prediction of
future events or circumstances, and those future events or circum-
stances may not occur. A forward-looking statement is usually
identiﬁed by our use of certain terminology, including “believes,”
“expects,” “may,” “will,” “should,” “seeks,” “pro forma,” “antici-
pates,” “intends” or “plans” or by discussions of strategies,
intentions or outlook. Potential risks and uncertainties include,
but are not limited to

• Economic conditions in the markets in which we operate, which

can affect demand for our services.

• Our ability to match aircraft, vehicle and sort capacity with cus-

tomer volume levels.

• The costs and complexities associated with the integration of
certain of our sales, marketing, customer service and informa-
tion technology functions.

• Market acceptance of our new sales, marketing and branding
strategies, as well as our residential home delivery service.

• Competition from other providers of transportation and logistics
services, including competitive responses to our new initiatives.

• Our ability to adapt to technological change and to compete
with new or improved services offered by our competitors.

• Changes in customer demand patterns, including the impact of

technology developments on demand for our services.

• Increases in aviation and motor fuel prices.
• Work stoppages, strikes or slowdowns by our employees.
• Our ability, and that of our principal competitors, to obtain and
maintain aviation rights in important international markets.

• Changes in government regulation.
• Changes in weather.
• Availability of ﬁnancing on terms acceptable to us.
• Other uncertainties detailed herein and from time to time in our

Securities and Exchange Commission ﬁlings and press releases.

We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new infor-
mation, future events or otherwise.

Except as otherwise indicated, any reference to a year means
our ﬁscal year ended May 31 of the year referenced.

CONSOLIDATED STATEMENTS OF INCOME

Years ended May 31
In thousands, except per share amounts

REVENUES

OPERATING EXPENSES
Salaries and employee beneﬁts
Purchased transportation
Rentals and landing fees
Depreciation and amortization
Fuel
Maintenance and repairs
Other

OPERATING INCOME

OTHER INCOME (EXPENSE)
Interest, net
Other, net

INCOME BEFORE INCOME TAXES

PROVISION FOR INCOME TAXES

NET INCOME

EARNINGS PER COMMON SHARE

Basic
Assuming dilution

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

2001
$19,629,040

2000
$18,256,945

1999
$16,773,470

8,263,413
1,713,027
1,650,048
1,275,774
1,142,741
1,170,103
3,343,044
18,558,150
1,070,890

(143,953)
636
(143,317)
927,573
343,202
584,371

2.02
1.99

$
$

7,597,964
1,674,854
1,538,713
1,154,863
918,513
1,101,424
3,049,540
17,035,871
1,221,074

(106,060)
22,726
(83,334)
1,137,740
449,404
688,336

2.36
2.32

$
$

7,087,728
1,537,785
1,396,694
1,035,118
604,929
958,873
2,989,257
15,610,384
1,163,086

(98,191)
(3,831)
(102,022)
1,061,064
429,731
631,333

2.13
2.10

$
$

CONSOLIDATED BALANCE SHEETS

May 31
In thousands, except shares

ASSETS

CURRENT ASSETS
Cash and cash equivalents
Receivables, less allowances of $95,815 and $85,972
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
Current portion of long-term debt
Accrued salaries and employee beneﬁts
Accounts payable
Accrued expenses

Total current liabilities

LONG-TERM DEBT, LESS CURRENT PORTION

DEFERRED INCOME TAXES

OTHER LIABILITIES
COMMITMENTS AND CONTINGENCIES (Notes 5, 13 and 14)
COMMON STOCKHOLDERS’ INVESTMENT
Common stock, $.10 par value; 800,000,000 shares authorized;

298,573,387 shares issued

Additional paid-in capital
Retained earnings
Accumulated other comprehensive income

Less treasury stock, at cost and deferred compensation

Total common stockholders’ investment

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

2001

2000

121,302
2,506,044
269,269
435,406
117,040
3,449,061

5,312,853
4,620,894
2,637,350
3,840,899
16,411,996
8,311,941
8,100,055

1,082,223
708,673
1,790,896
$13,340,012

221,392
699,906
1,255,298
1,072,920
3,249,516
1,900,119
455,591
1,834,366

29,857
1,120,627
4,879,647
(55,833)
5,974,298
73,878
5,900,420
$13,340,012

67,959
2,547,043
255,291
317,784
96,667
3,284,744

4,960,204
4,203,927
2,416,666
3,161,746
14,742,543
7,659,016
7,083,527

500,547
658,293
1,158,840
$11,527,111

6,537
755,747
1,120,855
1,007,887
2,891,026
1,776,253
344,613
1,729,976

29,857
1,079,462
4,295,041
(36,074)
5,368,286
583,043
4,785,243
$11,527,111

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended May 31
In thousands

OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to cash provided

by operating activities:

Depreciation and amortization
Provision for uncollectible accounts
Aircraft related impairment charges
Deferred income taxes and other noncash items
Gain from disposals of property and equipment
Changes in operating assets and liabilities, net of the effects of

businesses acquired:

Decrease (increase) in receivables
(Increase) decrease in other current assets
Increase in accounts payable and other operating liabilities
Other, net
Cash provided by operating activities
INVESTING ACTIVITIES
Purchases of property and equipment, including deposits on aircraft of

$7,900, $1,500 and $1,200

Proceeds from dispositions of property and equipment:

Sale-leaseback transactions
Reimbursements of A300 and MD11 deposits
Other dispositions

Business acquisitions, net of cash acquired
Other, net
Cash used in investing activities
FINANCING ACTIVITIES
Principal payments on debt
Proceeds from debt issuances
Proceeds from stock issuances
Purchase of treasury stock
Other, net
Cash provided by (used in) ﬁnancing activities
CASH AND CASH EQUIVALENTS
Net increase (decrease) in cash and cash equivalents
Balance at beginning of year
Balance at end of year

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

2001

2000

1999

$ 584,371

$ 688,336

$ 631,333

1,275,774
112,264
102,000
(16,024)
(4,440)

61,702
(112,476)
102,390
(61,755)
2,043,806

1,154,863
71,107
–
(7,363)
(17,068)

(404,511)
70,720
107,543
(38,385)
1,625,242

1,035,118
55,649
–
(34,037)
(2,330)

(294,121)
(155,720)
555,565
(19,337)
1,772,120

(1,893,384)

(1,627,418)

(1,769,946)

237,000
–
37,444
(476,992)
(16,783)
(2,112,715)

(650,280)
743,522
28,654
–
356
122,252

53,343
67,959
$ 121,302

–
24,377
165,397
(257,095)
(13,378)
(1,708,117)

(115,090)
517,664
15,523
(606,506)
13,920
(174,489)

80,995
67,269
195,641
–
(22,716)
(1,448,757)

(269,367)
–
49,932
(8,168)
(2)
(227,605)

(257,364)
325,323
67,959

95,758
229,565
$ 325,323

CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ INVESTMENT AND
COMPREHENSIVE INCOME

Common
Stock
$14,741
–

Additional
Paid-in
Capital
$ 992,821
–

Retained
Earnings
$2,999,354
631,333

Accumulated
Other Com-
prehensive
Income
$(27,277)
–

Corporation in the form of a 100%
stock dividend (148,931,996 shares)

14,890

In thousands, except shares

BALANCE AT MAY 31, 1998
Net income
Foreign currency translation adjustment,
net of deferred tax beneﬁt of $959
Unrealized gain on available-for-sale

securities, net of deferred
taxes of $2,100

Total comprehensive income

Purchase of treasury stock
Two-for-one stock split by FedEx

Employee incentive plans and other

(1,770,626 shares issued)

Amortization of deferred

compensation
BALANCE AT MAY 31, 1999
Net income
Foreign currency translation adjustment,
net of deferred tax beneﬁt of $1,881

Unrealized loss on available-for-sale

securities, net of deferred tax beneﬁt
of $1,513

Total comprehensive income

Shares issued for acquisition

(175,644 shares)

Purchase of treasury stock
Employee incentive plans and other

(1,539,941 shares issued)

Amortization of deferred compensation
BALANCE AT MAY 31, 2000
Net income
Foreign currency translation adjustment,
net of deferred tax beneﬁt of $6,849

Unrealized loss on available-for-sale

securities, net of deferred
tax beneﬁt of $574

Total comprehensive income

Shares issued for acquisition

(11,042,965 shares)

Employee incentive plans and other

(1,841,543 shares issued)

Amortization of deferred compensation
BALANCE AT MAY 31, 2001

–

(14,890)

168

68,491

–

–
29,799
–

–
1,061,312
–

–
3,615,797
688,336

–

–
–

–

–
–

–

191
–

58
–
29,857
–

18,150
–
1,079,462
–

(9,283)
–
4,295,041
584,371

–

Treasury
Stock
–
–

–

(8,168)

–

Deferred
Compen-
sation
$(18,409)
–

–

Total
$3,961,230
631,333

(611)

3,200
633,922
(8,168)

–

6,887

(7,766)

67,780

–
(1,281)
–

8,928
(17,247)
–

–

6,626
(606,506)

37,067
–
(564,094)
–

–

8,928
4,663,692
688,336

(9,021)

(2,365)
676,950

6,817
(606,506)

32,112
12,178
4,785,243
584,371

(18,944)

(815)
564,612

506,390

–

–
–

(13,880)
12,178
(18,949)
–

–

(611)

3,200

–

–
(24,688)
–

(9,021)

(2,365)

–
–

–
–
(36,074)
–

(18,944)

(815)

41,675

27,131

–

437,584

–
–
$29,857

(510)
–
$1,120,627

(26,896)
–
$4,879,647

–
–
$(55,833)

73,020
–
$ (53,490)

(12,865)
11,426
$(20,388)

32,749
11,426
$5,900,420

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS. FedEx Corporation (“FedEx”) is a
premier global provider of transportation, e-commerce and sup-
ply chain management services, whose operations are primarily
represented by Federal Express Corporation (“FedEx Express”),
the world’s largest express transportation company; FedEx
Ground Package System, Inc. (“FedEx Ground”), North America’s
second largest provider of small-package ground delivery serv-
ice; and FedEx Freight System, Inc. (“FedEx Freight”), a leading
provider of regional less-than-truckload (“LTL”) freight services.
Other operating companies included in the FedEx portfolio are
FedEx Custom Critical, Inc. (“FedEx Custom Critical”), a critical-
shipment carrier; FedEx Trade Networks, Inc. (“FedEx Trade
Networks”), a global trade services company; and FedEx Supply
Chain Services, Inc. (“FedEx Supply Chain Services”), a contract
logistics provider.

FedEx Freight was formed in the third quarter of 2001 in con-
junction with our acquisition of American Freightways, Inc.
(“American Freightways”). FedEx Freight includes the results of
operations of American Freightways, a multiregional LTL carrier,
from January 1, 2001 and Viking Freight, Inc. (“Viking”), an LTL
carrier operating principally in the western United States, from
December 1, 2000.

PRINCIPLES OF CONSOLIDATION. The consolidated ﬁnancial
statements include the accounts of FedEx and its subsidiaries.
All signiﬁcant intercompany accounts and transactions have
been eliminated.

SUBSIDIARY GUARANTORS. Certain long-term debt contains
subsidiary guarantees. The guarantees provided by our sub-
sidiaries are full and unconditional, joint and several, and any
subsidiaries which are not guarantors are minor as deﬁned by
Securities and Exchange Commission (“SEC”) regulations. FedEx,
as the parent company issuer of this debt, has no independent
assets or operations. There are no signiﬁcant restrictions on our
ability or the ability of any guarantor to obtain funds from its sub-
sidiaries by means of dividend or loan.

CREDIT RISK. Credit risk in trade receivables is substantially miti-
gated by our credit evaluation process, short collection terms,
and sales to a large number of customers, as well as the low rev-
enue per transaction for most of our transportation services.
Allowances for potential credit losses are determined based
on historical experience, current evaluation of the composition
of accounts receivable and expected credit trends.

REVENUE RECOGNITION. Revenue is recognized upon delivery of
shipments. For shipments in transit, revenue is recorded based on
the percentage of service completed at the balance sheet date.

ADVERTISING. Generally, advertising costs are expensed as
incurred and are classiﬁed in other operating expenses.
Advertising expenses were $236,559,000, $221,511,000 and
$202,104,000 in 2001, 2000 and 1999, respectively.

CASH EQUIVALENTS. Cash equivalents in excess of current
operating requirements are 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. Interest income was $11,197,000, $15,116,000 and
$12,399,000 in 2001, 2000 and 1999, respectively.

MARKETABLE SECURITIES. Marketable securities are classiﬁed
as available-for-sale securities and are reported at fair value.
Unrealized gains and losses are reported, net of related deferred
income taxes, as a component of accumulated other comprehen-
sive income.

SPARE PARTS, SUPPLIES AND FUEL. Spare parts are stated prin-
cipally 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.

PROPERTY AND EQUIPMENT. Expenditures for major additions,
improvements, ﬂight equipment modiﬁcations and certain equip-
ment overhaul costs are capitalized. Maintenance and repairs
are charged to expense as incurred. 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
Package handling and ground support

equipment and vehicles

Computer and electronic equipment
Other

5 to 20 years

3 to 30 years
3 to 10 years
2 to 30 years

Aircraft airframes and engines are assigned residual values
ranging up to 20% of asset cost. All other property and equipment
have no material residual values. Vehicles are depreciated on a
straight-line basis over ﬁve to 10 years. Depreciation expense
was $1,241,493,000, $1,132,129,000, and $1,017,950,000 in 2001,
2000 and 1999, respectively.

2121

Notes to Consolidated Financial Statements

For income tax purposes, depreciation is generally computed
using accelerated methods.

representing the long-term portion of self-insurance accruals for
workers’ compensation and vehicle liabilities.

CAPITALIZED INTEREST. Interest on funds used to ﬁnance the
acquisition and modiﬁcation of aircraft, construction of certain
facilities, and development of certain software up to the date the
asset is placed in service is capitalized and included in the cost
of the asset. Capitalized interest was $26,536,000, $34,823,000 and
$38,880,000 for 2001, 2000 and 1999, respectively.

DEFERRED LEASE OBLIGATIONS. While certain aircraft and facil-
ity 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, 2001 and 2000, were
$398,298,000 and $354,566,000, respectively, representing the
cumulative difference between rent expense and rent payments.

IMPAIRMENT OF LONG-LIVED ASSETS. Long-lived assets includ-
ing goodwill are reviewed for impairment when circumstances
indicate the carrying value of an asset may not be recoverable.
For assets that are to be held and used, an impairment is recog-
nized when the estimated undiscounted cash ﬂows associated
with the asset or group of assets is less than their carrying value.
If impairment exists, an adjustment is made to write the asset
down to its fair value, and a loss is recorded as the difference
between the carrying value and fair value. Fair values are deter-
mined based on quoted market values, discounted cash ﬂows or
internal and external appraisals, as applicable. Assets to be dis-
posed of are carried at the lower of carrying value or estimated
net realizable value. See Notes 15 and 16 for information con-
cerning the impairment charges recognized in 2001.

GOODWILL. Goodwill is recognized for the excess of the pur-
chase price over the fair value of tangible and identiﬁable intan-
gible net assets of businesses acquired. It is amortized over
the estimated period of beneﬁt on a straight-line basis over peri-
ods generally ranging from 15 to 40 years. Accumulated amortiza-
tion was $201,766,000 and $165,624,000 at May 31, 2001 and
2000, respectively.

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 state-
ments. The liability method is used 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.

We have not provided for U.S. federal income taxes on foreign
subsidiaries’ earnings deemed to be permanently reinvested and
any related taxes associated with such earnings are not material.

SELF-INSURANCE ACCRUALS. We are self-insured up to certain
levels for workers’ compensation, employee health care and
vehicle liabilities. Accruals are based on the actuarially estimated
undiscounted cost of claims. Included in other liabilities at May 31,
2001 and 2000, were $363,664,000 and $324,869,000, respectively,

DEFERRED GAINS. Gains on the sale and leaseback of aircraft
and other property and equipment are deferred and amortized
ratably over the life of the lease as a reduction of rent expense.
Included in other liabilities at May 31, 2001 and 2000 were
deferred gains of $511,932,000 and $533,371,000, respectively.

DERIVATIVE INSTRUMENTS. Through the period ending May 31,
2001, jet fuel forward contracts were accounted for as hedges
under Statement of Financial Accounting Standards No. (“SFAS”)
80, “Accounting for Futures Contracts.” At June 1, 2001, we
adopted SFAS 133, “Accounting for Derivative Instruments and
Hedging Activities.” See Recent Pronouncements.

FOREIGN CURRENCY TRANSLATION. Translation gains and losses
of foreign operations that use local currencies as the functional
currency are accumulated and reported, net of applicable
deferred income taxes, as a component of accumulated other
comprehensive income within common stockholders’ investment.
Transaction gains and losses that arise from exchange rate ﬂuctu-
ations on transactions denominated in a currency other than the
local functional currency are included in the results of operations.
Balances for foreign currency translation in accumulated other
comprehensive income were ($55,853,000), ($36,909,000) and
($27,888,000) at May 31, 2001, 2000 and 1999, respectively.

RECENT PRONOUNCEMENTS. We adopted SFAS 133, “Accounting
for Derivative Instruments and Hedging Activities” (as amended
by SFAS 137 and SFAS 138) at the beginning of 2002. The adoption
of this Statement will not have a material effect on our ﬁnancial
position or results of operations for 2002.

RECLASSIFICATIONS. Certain prior year amounts have been
reclassiﬁed to conform to the 2001 presentation.

USE OF ESTIMATES. The preparation of the consolidated ﬁnan-
cial statements in conformity with accounting principles gener-
ally accepted in the United States requires the use of 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.

FedEx Corporation

NOTE 2: BUSINESS COMBINATIONS

On February 9, 2001, we completed the acquisition of American
Freightways, a multiregional less-than-truckload motor carrier,
for approximately $978,000,000, including $471,000,000 in cash,
11.0 million shares of FedEx common stock and options to pur-
chase 1.5 million shares of FedEx common stock. The acquisition
was completed in a two-step transaction that included a cash
tender offer and a merger that resulted in the acquisition of all
outstanding shares of American Freightways. The ﬁrst step of the
transaction was completed on December 21, 2000 by acquiring for
cash 50.1% of the outstanding shares of American Freightways,
or 16,380,038 shares at a price of $28.13 per share. On February 9,
2001, American Freightways was merged into a newly-created
subsidiary of FedEx and each remaining outstanding share of
American Freightways common stock was converted into
0.6639 shares of common stock of FedEx. The excess purchase
price over the estimated fair value of the net assets acquired
(approximately $600 million) has been recorded as goodwill and
is being amortized ratably over 40 years.

The following unaudited pro forma consolidated results of opera-
tions are presented as if the acquisition of American Freightways
had been made at the beginning of the periods presented:

May 31,
In thousands, except per share amounts
Revenues
Net income
Basic earnings per share
Diluted earnings per share

2001
$20,493,991
601,825
2.03
2.00

2000
$19,541,425
710,119
2.35
2.31

The pro forma consolidated results of operations include adjust-
ments to give effect to the amortization of goodwill, interest
expense on acquisition-related debt and certain other purchase
accounting adjustments. The pro forma information is not neces-
sarily indicative of the results of operations that would have
occurred had the purchase been made at the beginning of the peri-
ods presented or the future results of the combined operations.

On March 31, 2000, the common stock of World Tariff, Limited
(“World Tariff”) was acquired for approximately $8,400,000 in cash
and stock. World Tariff is a source of customs duty and tax infor-
mation around the globe. This business is operating as a sub-
sidiary of FedEx Trade Networks. The excess of purchase price
over the estimated fair value of the net assets acquired ($8,300,000)
has been recorded as goodwill and is being amortized ratably
over 25 years.

On February 29, 2000, the common stock of Tower Group
International, Inc. (“Tower”) was acquired for approximately
$140,000,000 in cash. Tower primarily provides international cus-
toms clearance services. This business is operating as a sub-
sidiary of FedEx Trade Networks. The excess of purchase price
over the estimated fair value of the net assets acquired ($30,000,000)
has been recorded as goodwill and is being amortized ratably
over 25 years.

On September 10, 1999, the assets of GeoLogistics Air Services,
Inc. were acquired for approximately $116,000,000 in cash. This
business operates under the name Caribbean Transportation
Services, Inc. (“CTS”), and is a subsidiary of FedEx Trade Networks.
CTS is an airfreight forwarder servicing freight shipments prima-
rily between the United States and Puerto Rico. The excess of
purchase price over the estimated fair value of the net assets
acquired ($103,000,000) has been recorded as goodwill and is
being amortized ratably over 15 years.

The operating results of these acquired companies are included
in consolidated operations from the date of acquisition. For
American Freightways, the results of operations are included
from January 1, 2001, which was the date of acquisition for ﬁnan-
cial reporting purposes. Pro forma results including these acqui-
sitions, except American Freightways, would not differ materially
from reported results in any of the periods presented.

NOTE 3: ACCRUED SALARIES AND EMPLOYEE BENEFITS AND
ACCRUED EXPENSES

The components of accrued salaries and employee beneﬁts and
accrued expenses were as follows:

May 31
In thousands
Salaries
Employee beneﬁts
Compensated absences

Total accrued salaries and
employee beneﬁts

Insurance
Taxes other than income taxes
Other

Total accrued expenses

2001
$ 192,892
152,979
354,035

$ 699,906
$ 427,685
239,718
405,517
$1,072,920

2000
$ 168,582
260,063
327,102

$ 755,747
$ 363,899
237,342
406,646
$1,007,887

Notes to Consolidated Financial Statements

NOTE 4: LONG-TERM DEBT AND OTHER FINANCING
ARRANGEMENTS

May 31
In thousands
Unsecured debt
Commercial paper, weighted-average

interest rate of 6.73%

Capital lease obligations and tax exempt

bonds, interest rates of 5.35% to 7.88%,
due through 2017, less bond reserves
of $9,024

Other debt, interest rates of 9.68% to 11.12%

Less current portion

2001
$1,836,616

2000
$ 975,862

–

521,031

247,227
37,668
2,121,511
221,392
$1,900,119

244,545
41,352
1,782,790
6,537
$1,776,253

We have a $1,000,000,000 revolving credit agreement with domes-
tic and foreign banks. The revolving credit agreement comprises
two parts. The ﬁrst part provides for a commitment of $800,000,000
through January 27, 2003. The second part provides for a 364-day
commitment for $200,000,000 through September 30, 2001. Interest
rates on borrowings under this agreement are generally deter-
mined by maturities selected and prevailing market conditions.
The revolving credit agreement contains certain covenants and
restrictions, none of which are expected to signiﬁcantly affect
our operations or ability to pay dividends.

As of May 31, 2001, approximately $2,655,000,000 was available
for the payment of dividends under the restrictive covenant of the
revolving credit agreement. Commercial paper borrowings are
backed by unused commitments under the revolving credit agree-
ment and reduce the amount available under the agreement.
As of May 31, 2001, no commercial paper borrowings were out-
standing and the entire credit facility was available.

The components of unsecured debt (net of discounts) were
as follows:

May 31
In thousands
Senior debt:

Interest rates of 6.63% to 7.25%,

due through 2011

Interest rates of 9.65% to 9.88%,

due through 2013

Interest rate of 7.80%, due 2007
Interest rates of 6.92% to 8.91%,

due through 2012

Bonds, interest rate of 7.60%, due in 2098
Medium term notes:

Interest rates of 9.95% to 10.57%,

due through 2007

Other

2001

2000

$ 745,844

–

474,161
200,000

117,701
239,389

473,970
200,000

–
239,382

59,054
467
$1,836,616

62,510
–
$975,862

On February 12, 2001, senior unsecured notes were issued in the
amount of $750,000,000. These notes are guaranteed by all of our
subsidiaries that are not considered minor as deﬁned by SEC reg-
ulations. Net proceeds from the borrowings were used to repay
indebtedness, principally borrowings under the commercial
paper program, and for general corporate purposes. The notes
were issued in three tranches, with the following terms and
interest rates:

Amount
$250,000,000
$250,000,000
$250,000,000

Maturity
2004
2006
2011

Rate
6.625%
6.875%
7.250%

In conjunction with the American Freightways acquisition on
February 9, 2001, debt of $240,000,000 was assumed, a portion of
which was reﬁnanced subsequent to the acquisition. As of
May 31, 2001, $117,701,000 of the assumed debt had not been
reﬁnanced and remained outstanding. This debt matures through
2012 and bears interest at rates of 6.92% to 8.91%.

Scheduled annual principal maturities of long-term debt for the
five years subsequent to May 31, 2001, are as follows: $221,400,000
in 2002; $18,400,000 in 2003; $287,300,000 in 2004; $17,600,000 in
2005; and $273,400,000 in 2006.

Long-term debt, exclusive of capital leases, had carrying values of
$1,919,000,000 and $1,063,000,000 at May 31, 2001 and 2000, respec-
tively, compared with fair values of approximately $1,999,000,000
and $1,055,000,000 at those dates. The estimated fair values were
determined based on quoted market prices or on the current rates
offered for debt with similar terms and maturities.

NOTE 5: LEASE COMMITMENTS

We utilize certain aircraft, land, facilities and equipment under
capital and operating leases that expire at various dates through
2038. In addition, supplemental aircraft are leased under agree-
ments that generally provide for cancellation upon 30 days’ notice.

The components of property and equipment recorded under capi-
tal leases were as follows:

May 31
In thousands
Package handling and ground support

equipment and vehicles

Facilities
Computer and electronic equipment and other

Less accumulated amortization

2001

2000

$196,900
136,178
2,858
335,936
236,921
$ 99,015

$226,580
134,442
6,852
367,874
260,526
$107,348

FedEx Corporation

Rent expense under operating leases for the years ended May 31
was as follows:

and 2000, respectively, 1,244,490 and 14,128,998 shares remained
in treasury.

In thousands
Minimum rentals
Contingent rentals

2001
$1,398,620
91,230
$1,489,850

2000
$1,298,821
98,755
$1,397,576

1999
$1,246,259
59,839
$1,306,098

Contingent rentals are based on hours ﬂown under supplemental
aircraft leases.

A summary of future minimum lease payments under capital
leases and noncancellable operating leases (principally aircraft
and facilities) with an initial or remaining term in excess of one
year at May 31, 2001 is as follows:

In thousands
2002
2003
2004
2005
2006
Thereafter

Capital
Leases
$ 15,416
15,279
15,132
15,044
15,040
274,665
$350,576

Operating
Leases
$ 1,246,936
1,134,413
1,043,549
981,777
916,084
9,040,570
$14,363,329

At May 31, 2001, the present value of future minimum lease pay-
ments for capital lease obligations, including certain tax-exempt
bonds, was $202,107,000.

FedEx Express makes payments under certain leveraged operating
leases that are sufﬁcient to pay principal and interest on certain
pass-through certiﬁcates. The pass-through certiﬁcates are not
direct obligations of, or guaranteed by, us or FedEx Express.

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 cer-
tain rights and preferences, and has no par value. As of May 31,
2001, none of these shares had been issued.

NOTE 7: COMMON STOCKHOLDERS’ INVESTMENT

Treasury Shares

During 2000, we purchased 15,208,356 treasury shares. Of these
shares, 15,000,000, or approximately 5% of our outstanding shares
of common stock, were purchased under a stock repurchase pro-
gram at an average cost of $39.75 per share. Approximately
11,000,000 of the shares held in treasury were reissued February
9, 2001, for the acquisition of American Freightways. During 2001
and 2000, treasury shares were also utilized for issuances under
the stock compensation plans discussed below. At May 31, 2001,

Stock Compensation Plans

Options and awards outstanding under stock-based compen-
sation plans at May 31, 2001 are described below. As of May 31,
2001, 25,880,128 shares of common stock were reserved for
issuance under these plans. The Board of Directors has author-
ized the repurchase of common stock necessary for grants or
option exercises under these stock plans.

Accounting Principles Board Opinion No. 25, “Accounting for
Stock Issued to Employees,” and related interpretations is
applied to measure compensation expense for stock-based com-
pensation plans. If compensation cost for stock-based compen-
sation plans had been determined under SFAS 123, “Accounting
for Stock-Based Compensation,” net income and earnings per
share would have been the pro forma amounts indicated below:

In thousands, except per share amounts
Net income:

2001

2000

1999

As reported
Pro forma

$584,371
553,033

Earnings per share, assuming dilution:
$

As reported
Pro forma

1.99
1.89

$688,336
659,601

2.32
2.23

$631,333
609,960

2.10
2.03

Fixed Stock Option Plans

Under the provisions of our stock incentive plans, options may be
granted to certain key employees (and, under the 1997 plan, to
directors who are not employees) to purchase shares of common
stock 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 requirements are determined at the discretion of the
Compensation Committee of the Board of Directors. Presently,
option vesting periods range from one to eight years. At May 31,
2001, there were 7,218,032 shares available 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

2001

2000

1999

0%
35%
4.3%–6.5%

0%
30%
5.6%–6.8%

0%
25%
4.2%–5.6%

2.5–5.5 years 2.5–9.5 years 2.5–5.5 years

Notes to Consolidated Financial Statements

The following table summarizes information about our ﬁxed stock option plans for the years ended May 31:

Outstanding at beginning of year
Granted and assumed
Exercised
Forfeited
Outstanding at end of year
Exercisable at end of year

2001
Weighted-Average
Exercise Price
$29.12
31.19
20.02
37.25
30.24
25.09

2000

1999

Weighted-Average
Exercise Price
$23.11
50.79
18.81
33.81
29.12
21.44

Shares
13,388,452
3,377,500
(3,135,640)
(230,780)
13,399,532
4,404,146

___________________

Weighted-Average
Exercise Price
$19.74
31.80
17.86
26.59
23.11
18.57

Shares
13,399,532
3,218,450
(1,232,699)
(374,632)
15,010,651
5,781,855

___________________

Shares
15,010,651
4,267,753(1)
(1,465,684)
(314,162)
17,498,558
8,704,009

___________________

(1) Includes 1,479,016 options assumed upon acquisition of American Freightways in 2001.

The weighted-average fair value of options granted during the year was $13.19, $16.63 and $9.12 for the years ended May 31, 2001, 2000
and 1999, respectively.

The following table summarizes information about ﬁxed stock options outstanding at May 31, 2001:

Range of
Exercise Prices
$ 8.63–$12.00
12.19– 17.70
18.45– 25.19
26.44– 37.25
38.69– 55.94
8.63– 55.94

Restricted Stock Plans

Options Outstanding

Options Exercisable

Number
Outstanding
157,274
2,261,561
4,687,294
7,018,067
3,374,362
17,498,558

___________________

Weighted-Average
Remaining
Contractual Life
0.6 years
3.9 years
4.8 years
7.4 years
8.3 years
6.4 years

Weighted-Average
Exercise Price
$10.13
15.69
20.44
32.41
50.04
30.24

Number
Exercisable
157,274
1,899,134
3,023,630
2,860,491
763,480
8,704,009

_________________

Weighted-Average
Exercise Price
$10.13
15.59
20.48
30.24
50.75
25.09

Under the terms of our Restricted Stock Plans, shares of 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 at the date of award.
Compensation related to these plans is recorded as a reduction of common stockholders’ investment and is being amortized to expense as
restrictions on such shares expire. In March 2001, the Board of Directors approved an additional restricted stock plan, which authorized
the issuance of up to 1,000,000 common shares. The following table summarizes information about restricted stock awards for the years
ended May 31:

Awarded
Forfeited

2001
Weighted-Average
Fair Value
$39.89
40.92

Shares
330,250
8,438

2000

Shares
283,750
20,000

Weighted-Average
Fair Value
$51.90
37.71

1999

Shares
252,000
16,900

Weighted-Average
Fair Value
$32.71
44.38

At May 31, 2001, there were 1,163,538 shares available for future awards under these plans. Compensation cost for the restricted stock
plans was $11,426,000, $12,178,000 and $8,928,000 for 2001, 2000 and 1999, respectively.

FedEx Corporation

NOTE 8: COMPUTATION OF EARNINGS PER SHARE

The calculation of basic earnings per share and earnings per share, assuming dilution, for the years ended May 31 was as follows:

In thousands, except per share amounts
Net income applicable to common stockholders
Weighted-average common shares outstanding
Basic earnings per share
Weighted-average common shares outstanding
Common equivalent shares:

Assumed exercise of outstanding dilutive options
Less shares repurchased from proceeds of assumed exercise of options

Weighted-average common and common equivalent shares outstanding
Earnings per share, assuming dilution

NOTE 9: INCOME TAXES

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 (credit):

Domestic

Federal
State and local

Foreign

2001

2000

1999

$310,408
42,788
36,152
389,348

$365,137
48,837
39,844
453,818

$385,164
49,918
22,730
457,812

(43,043)
(3,088)
(15)
(46,146)
$343,202

(3,444)
469
(1,439)
(4,414)
$449,404

(21,773)
(4,437)
(1,871)
(28,081)
$429,731

2001
$584,371
288,745
2.02
$
288,745

14,690
(10,256)
293,179
1.99
$

2000
$688,336
291,727
2.36
$
291,727

12,735
(8,136)
296,326
2.32
$

1999
$631,333
295,983
2.13
$
295,983

13,090
(8,430)
300,643
2.10
$

Income taxes have been provided for foreign operations based
upon the various tax laws and rates of the countries in which
operations are conducted. There is no direct relationship between
our overall foreign income tax provision and foreign pretax book
income due to the different methods of taxation used by coun-
tries throughout the world.

A reconciliation of the statutory federal income tax rate to the
effective income tax rate for the years ended May 31 is as follows:

Statutory U.S. income tax rate
Increase resulting from:

State and local income taxes,
net of federal beneﬁt

Other, net
Effective tax rate

2001
35.0%

2.8
(0.8)
37.0%

The signiﬁcant components of deferred tax assets and liabilities as of May 31 were as follows:

In thousands

Property, equipment and leases
Employee beneﬁts
Self-insurance accruals
Other

Deferred Tax
Assets
$ 268,696
225,931
276,886
241,587
$1,013,100

2001

Deferred Tax
Liabilities
$ 815,504
118,104
–
99,677
$1,033,285

1999
35.0%

2.8
2.7
40.5%

2000
35.0%

2.8
1.7
39.5%

2000

Deferred Tax
Assets
$206,239
207,297
245,923
224,615
$884,074

Deferred Tax
Liabilities
$686,547
127,784
–
96,572
$910,903

NOTE 10: EMPLOYEE BENEFIT PLANS

PENSION PLANS. We sponsor deﬁned beneﬁt pension plans cov-
ering a majority of employees. The largest plan covers certain
U.S. employees age 21 and over, with at least one year of service,
and provides beneﬁts based on average earnings and years of
service. Plan funding is actuarially determined, and is also sub-
ject to certain tax law limitations. International deﬁned beneﬁt

pension plans provide beneﬁts primarily based on ﬁnal earnings
and years of service and are funded in accordance with local
laws and income tax regulations. Plan assets consist primarily
of marketable equity securities and ﬁxed income instruments.

In 2001, we changed the actuarial valuation measurement date
for certain of our pension plans from May 31 to February 28 to
conform to the measurement date used for our postretirement

Notes to Consolidated Financial Statements

health care plans and to facilitate our planning and budgeting
process. Additionally, in connection with the 2001 valuation, we
changed to the calculated value method of valuing plan assets.
These changes had no impact on our 2001 ﬁnancial position or
results of operations.

The Federal Express Corporation Employees’ Pension Plan and
the FedEx Ground Package System, Inc. and Certain Afﬁliates
Career Reward Pension Plan were merged effective May 31,
2001. The name of the newly merged plan is the FedEx
Corporation Employees’ Pension Plan. No pension beneﬁt formu-
las were changed as a result of the merger.

POSTRETIREMENT HEALTH CARE PLANS. FedEx Express and
FedEx Corporate Services, Inc. (“FedEx Services”) offer medical
and dental coverage to eligible U.S. retirees and their eligible
dependents. Vision coverage is provided for retirees, but not their
dependents. Substantially all FedEx Express and FedEx Services
U.S. employees become eligible for these beneﬁts at age 55
and older, if they have permanent, continuous service 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.
FedEx Ground offers similar beneﬁts to its eligible retirees.

The following table provides a reconciliation of the changes in the pension and postretirement health care plans’ beneﬁt obligations and
fair value of assets over the two-year period ended May 31, 2001 and a statement of the funded status as of May 31, 2001 and 2000:

In thousands

CHANGE IN BENEFIT OBLIGATION
Beneﬁt obligation at beginning of year

Service cost
Interest cost
Amendments and beneﬁt enhancements
Actuarial loss (gain)
Plan participant contributions
Curtailment gain
Foreign currency exchange rate changes
Beneﬁts paid

Beneﬁt obligation at end of year
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year

Actual return on plan assets
Foreign currency exchange rate changes
Company contributions
Plan participant contributions
Beneﬁts paid

Fair value of plan assets at end of year
FUNDED STATUS OF THE PLANS

Unrecognized actuarial gain
Unrecognized prior service cost
Unrecognized transition amount

Prepaid (accrued) beneﬁt cost
AMOUNTS RECOGNIZED IN THE
BALANCE SHEET AT MAY 31:
Prepaid beneﬁt cost
Accrued beneﬁt liability
Minimum pension liability
Intangible asset

Prepaid (accrued) beneﬁt cost

Pension Plans

2001

2000

Postretirement Health Care Plans
2000

2001

$4,493,745
325,371
382,391
39,254
210,692
–
–
(10,666)
(56,879)
$5,383,908

$5,727,416
(142,537)
(2,689)
96,723
–
(56,879)
$5,622,034
$ 238,126
(159,958)
144,003
(9,511)
$ 212,660

$ 365,340
(152,680)
(19,848)
19,848
$ 212,660

$ 4,385,519
337,780
336,143
12,853
(510,132)
–
–
(618)
(67,800)
$ 4,493,745

$ 4,952,431
630,706
(5,192)
217,271
–
(67,800)
$ 5,727,416
$ 1,233,671
(1,173,903)
121,697
(10,529)
$ 170,936

$ 302,935
(131,999)
(12,662)
12,662
$ 170,936

$ 257,007
25,021
22,929
371
(12,141)
1,722
(1,232)
–
(8,044)
$ 285,633

–
–
–
6,322
1,722
(8,044)
$
–
$(285,633)
(60,099)
952
–
$(344,780)

–
(344,780)
–
–
$(344,780)

$ 246,186
26,450
19,579
1,420
(28,607)
1,112
–
–
(9,133)
$ 257,007

–
–
–
8,021
1,112
(9,133)
$
–
$(257,007)
(49,286)
254
–
$(306,039)

–
(306,039)
–
–
$(306,039)

FedEx Corporation

Net periodic beneﬁt cost for the years ended May 31 was as follows:

In thousands

Service cost
Interest cost
Expected return on plan assets
Net amortization and deferral
Curtailment gain

2001
$ 325,371
382,391
(623,735)
(23,702)
–
$ 60,325

Pension Plans

2000
$ 337,780
336,143
(546,169)
5,977
–
$ 133,731

1999
$ 331,005
288,221
(483,709)
(1,948)
–
$ 133,569

Postretirement Health Care Plans

2001
$25,021
22,929
–
(1,267)
(1,620)
$45,063

2000
$26,450
19,579
–
(93)
–
$45,936

WEIGHTED-AVERAGE ACTUARIAL ASSUMPTIONS

Discount rate
Rate of increase in future
compensation levels
Expected long-term rate of

return on assets

Pension Plans

Postretirement Health Care Plans

2001
7.7%

4.0

10.9

2000
8.5%

5.0

10.9

1999
7.5%

4.6

10.9

2001
8.2%

–

2000
8.3%

–

1999
$23,676
16,962
–
(211)
–
$40,427

1999
7.3%

–

The projected beneﬁt obligation, accumulated beneﬁt obligation
and fair value of plan assets for the pension plans with beneﬁt obli-
gations in excess of plan assets were $258,700,000, $211,700,000
and $57,100,000, respectively, as of May 31, 2001, and $177,900,000,
$126,300,000 and $2,700,000, respectively, as of May 31, 2000.

Future medical beneﬁt costs are estimated to increase at an
annual rate of 8.0% during 2002, decreasing to an annual growth
rate of 6.0% in 2007 and thereafter. Future dental beneﬁt costs
were estimated to increase at an annual rate of 7.3% during 2002,
decreasing to an annual growth rate of 6.0% in 2007 and there-
after. Our cost is capped at 150% of the 1993 employer cost and,
therefore, is not subject to medical and dental trends after the
capped cost is attained. A 1% change in these annual trend rates
would not have a signiﬁcant impact on the accumulated postre-
tirement beneﬁt obligation at May 31, 2001, or 2001 beneﬁt
expense. Claims are paid as incurred.

DEFINED CONTRIBUTION PLANS. Proﬁt sharing and other deﬁned
contribution plans are in place covering a majority of U.S. employ-
ees age 21 and over, with at least one year of service as of the
contribution date. Proﬁt sharing plans provide for discretionary
employer contributions, which are determined annually by the
Board of Directors. Other plans provide matching funds based on
employee contributions to 401(k) plans. Expense under these

plans was $99,400,000 in 2001, $125,300,000 in 2000 and
$137,500,000 in 1999. Included in these expense amounts are cash
distributions made directly to employees of $44,800,000,
$39,100,000 and $46,800,000 in 2001, 2000 and 1999, respectively.

NOTE 11: BUSINESS SEGMENT INFORMATION

We have determined our reportable operating segments to be
FedEx Express, FedEx Ground and FedEx Freight, each of which
operates in a single line of business. Segment ﬁnancial perfor-
mance is evaluated based on operating income.

Certain segment assets associated with the sales, marketing and
information technology departments previously recorded at FedEx
Express and FedEx Ground were transferred to FedEx Services in
conjunction with its formation effective June 1, 2000. The related
depreciation and amortization for those assets is now allocated
to these operating segments as “Intercompany charges.”
Consequently, 2001 depreciation and amortization expense,
assets and capital expenditure segment information presented is
not comparable to prior periods. We believe the total amounts
allocated to the business segments reasonably reﬂect the cost of
providing such services. Our Other segment also includes the
operations of Viking through November 30, 2000, certain unallo-
cated corporate items and eliminations.

The following table provides a reconciliation of reportable seg-
ment revenues, depreciation and amortization, operating income
and segment assets to consolidated ﬁnancial statement totals:

In thousands
Revenues

FedEx Express
FedEx Ground
FedEx Freight
Other

Consolidated Total
Depreciation and amortization

FedEx Express
FedEx Ground
FedEx Freight
Other

Consolidated Total
Operating income (loss)

FedEx Express
FedEx Ground
FedEx Freight
Other

2001

2000

1999

$15,533,567
2,236,562
835,298
1,023,613
$19,629,040

$15,068,338
2,032,570
–
1,156,037
$18,256,945

$13,979,277
1,878,107
–
916,086
$16,773,470

796,517
110,934
43,693
324,630
$ 1,275,774

997,735
99,140
–
57,988
$ 1,154,863

912,002
82,640
–
40,476
$ 1,035,118

847,401(1) $
175,150
55,032
(6,693)(2)

899,610
225,812
–
95,652
$ 1,221,074

871,476(3)
231,010
–
60,600
$ 1,163,086

Consolidated Total

$ 1,070,890

Segment assets

FedEx Express
FedEx Ground
FedEx Freight
Other

Consolidated Total

$ 9,570,621
1,157,988
1,703,121
908,282
$13,340,012

$ 9,740,539
1,057,519
–
729,053
$11,527,111

(1) Includes $93,000,000 charge for impairment of certain assets related to the
MD10 aircraft program and $9,000,000 charge related to the Ayres program.
(2) Includes $22,000,000 of FedEx Supply Chain Services reorganization costs.
(3) Includes $81,000,000 of strike contingency costs.

The following table provides a reconciliation of reportable seg-
ment capital expenditures to consolidated totals for the years
ended May 31:

In thousands
FedEx Express
FedEx Ground
FedEx Freight
Other
Consolidated Total

2001
$1,233,051
212,415
62,276
385,642
$1,893,384

2000
$1,330,904
244,073
–
52,441
$1,627,418

1999
$1,550,161
179,969
–
39,816
$1,769,946

Notes to Consolidated Financial Statements

The following table presents revenue by service type and
geographic information for the years ended or as of May 31:

In thousands

REVENUE BY SERVICE TYPE
FedEx Express:
Package:

2001

2000

1999

U.S. overnight box(1)
U.S. overnight envelope(2)
U.S. deferred

$ 5,829,972
1,870,881
2,492,522

$ 5,683,663
1,854,181
2,428,002

$ 5,409,036
1,776,426
2,271,151

Total domestic

package revenue

International priority

Total package revenue

Freight:
U.S.
International

Other

Total FedEx Express

FedEx Ground
FedEx Freight
Other

GEOGRAPHIC INFORMATION(3)
Revenues:
U.S.
International

Long-lived assets:
U.S.
International

10,193,375
3,939,612
14,132,987

9,965,846
3,551,593
13,517,439

9,456,613
3,018,828
12,475,441

650,779
424,216
325,585
15,533,567
2,236,562
835,298
1,023,613
$19,629,040

566,259
492,280
492,360
15,068,338
2,032,570
–
1,156,037
$18,256,945

439,855
530,759
533,222
13,979,277
1,878,107
–
916,086
$16,773,470

$14,857,625
4,771,415
$19,629,040

$13,804,849
4,452,096
$18,256,945

$12,910,107
3,863,363
$16,773,470

$ 8,637,458
1,253,493
$ 9,890,951

$ 7,224,219
1,018,148
$ 8,242,367

(1) The U.S. overnight box category includes packages exceeding eight ounces in weight.
(2) The U.S. overnight envelope category includes envelopes weighing eight ounces

or less.

(3) International revenue includes shipments that either originate in or are destined to
locations outside the United States. Long-lived assets include property and equip-
ment, goodwill and other long-term assets. Flight equipment is allocated between
geographic areas based on usage.

FedEx Corporation

NOTE 12: SUPPLEMENTAL CASH FLOW INFORMATION

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

Noncash 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 surrendered (under) over fair value of assets acquired
Fair value of treasury stock and common stock options issued in business acquisition

NOTE 13: COMMITMENTS AND CONTINGENCIES

Annual purchase commitments under various contracts as of May 31, 2001, were as follows:

In thousands
2002
2003
2004
2005
2006

Aircraft
$425,100
411,500
231,500
261,500
228,700

2001
$155,860
444,850

2001
–
4,868
$ (4,868)
$506,390

Aircraft-
Related(1)

$611,200
610,300
525,000
254,300
189,700

2000
$124,964
354,614

2000
$ 19,450
28,018
$ (8,568)
$ 6,817

1999
$114,326
437,340

1999
$ 48,248
34,580
$ 13,668
–
$

Other(2)

$359,400
13,200
8,000
7,600
7,600

Total
$1,395,700
1,035,000
764,500
523,400
426,000

(1) Primarily aircraft modiﬁcations, rotables, spare parts and spare engines.
(2) Primarily facilities, vehicles, computer and other equipment.

FedEx Express is committed to purchase 27 MD11s, nine DC10s,
seven A300s, seven A310s and 75 Ayres ALM 200s to be delivered
through 2007. See Note 15 for additional information regarding
the Ayres program. Deposits and progress payments of $8,300,000
have been made toward these purchases and other planned air-
craft transactions. Because Ayres Corporation ﬁled for Chapter 11
bankruptcy protection in November 2000, we believe it is unlikely
that any of the ALM 200 aircraft will be delivered to FedEx Express.
The purchase commitment amounts related to these aircraft are
$35,100,000, $96,100,000 and $75,800,000 in 2004, 2005 and 2006,
respectively, and are included in the above table.

FedEx Express has entered into agreements with two airlines to
acquire 53 DC10 aircraft (49 of which had been received as of
May 31, 2001), spare parts, aircraft engines and other equipment,
and maintenance services in exchange for a combination of
aircraft engine noise reduction kits and cash. Delivery of these
aircraft began in 1997 and will continue through 2002. Addition-
ally, these airlines may exercise put options through December 31,
2003, requiring FedEx Express to purchase up to 10 additional
DC10s along with additional aircraft engines and equipment.

In January 2001, FedEx Express entered into a memorandum
of understanding to acquire 10 A380 aircraft from Airbus
Industrie. The acquisition of these aircraft is subject to the exe-
cution of a deﬁnitive purchase agreement, which is currently
under negotiation.

During most of 2001 and 2000, we entered into jet fuel hedging
contracts on behalf of our subsidiary FedEx Express, which were
designed to limit exposure to ﬂuctuations in jet fuel prices. Under
those jet fuel hedging contracts, payments were made (or received)
based on the difference between a ﬁxed price and the market
price of jet fuel, as determined by an index of spot market prices
representing various geographic regions. The difference was
recorded as an increase or decrease in fuel expense. Under jet
fuel hedging contracts, we received $92,206,000 in 2001 and
$18,512,000 in 2000. All outstanding jet fuel hedging contracts
were effectively closed at May 31, 2001 by entering into offsetting
jet fuel hedging contracts, resulting in a deferred charge of
approximately $15,000,000, which will be recognized in 2002 as
fuel is purchased. At May 31, 2000, the fair value of jet fuel hedging
contracts, which had no carrying value, was an asset of approxi-
mately $51,060,000.

Notes to Consolidated Financial Statements

NOTE 14: LEGAL PROCEEDINGS

We are subject to legal proceedings and claims that arise in the
ordinary course of our business. In our opinion, the aggregate lia-
bility, if any, with respect to these actions will not materially
adversely affect our ﬁnancial position or results of operations.

NOTE 15: ASSET IMPAIRMENTS

Asset impairment adjustments of $102,000,000 at FedEx Express
were recorded in the fourth quarter of 2001. Impaired assets
were adjusted to fair value based on estimated fair market val-
ues. All charges relating to asset impairments were reﬂected as
other operating expenses in the Consolidated Statements of
Income. The asset impairment charge was comprised of two parts:

Certain assets related to the MD10 aircraft program
Ayres Loadmaster program deposits and other

$ 93,000,000
9,000,000
$102,000,000

These aircraft procurement programs were in place to ensure
adequate aircraft capacity for future volume growth. Due to low-
ered capacity requirements, it became evident during the fourth
quarter of 2001 that FedEx Express had more aircraft capacity
commitments than required. Certain aircraft awaiting modiﬁca-
tion under the MD10 program and the purchase commitments for
the Ayres aircraft were evaluated and determined to be impaired.

The MD10 program curtailment charge is comprised primarily of
the write down of impaired DC10 airframes, engines and parts to
a nominal estimated salvage value. Costs relating to the disposal
of the assets were also recorded. These assets are expected to
be disposed of primarily during 2002. The Ayres Loadmaster program

charge is comprised primarily of the write-off of deposits for
aircraft purchases. Capitalized interest and other costs estimated
to be unrecoverable in connection with the bankruptcy of Ayres
Corporation were also expensed.

NOTE 16: OTHER EVENTS

On April 24, 2001, FedEx Supply Chain Services committed to a plan
to reorganize certain of its unproﬁtable, nonstrategic logistics busi-
ness and reduce overhead. Total 2001 costs of $22,000,000 were
incurred in connection with this plan, primarily comprising costs for
estimated contractual settlements ($8,000,000), asset impairment
charges ($5,000,000) and severance and employee separation
($5,000,000). Asset impairment charges were recognized to reduce
the carrying value of long-lived assets (primarily software) to esti-
mated fair values, and an accrual of $17,000,000 was recorded for
the remaining reorganization costs. The accrual had a balance of
approximately $12,000,000 remaining at May 31, 2001, reﬂecting pri-
marily the payment of severance costs and contractual settlements.
Approximately 120 principally administrative positions were elimi-
nated under the plan. The reorganization will be completed in 2002.

On January 10, 2001, FedEx Express and the U.S. Postal Service
entered into two service contracts: one for domestic air trans-
portation of postal express shipments, and the other for placement
of FedEx Drop Boxes at U.S. Post Ofﬁces.

In 2000, FedEx Express recorded nonoperating gains of approxi-
mately $11,000,000 from the sale of securities and approximately
$12,000,000 from the insurance settlement for a leased MD11 air-
craft destroyed in October 1999.

NOTE 17: SUMMARY OF QUARTERLY OPERATING RESULTS (UNAUDITED)

In thousands, except per share amounts
2001
Revenues
Operating income
Income before income taxes
Net income
Earnings per common share
Earnings per common share – assuming dilution

2000
Revenues
Operating income
Income before income taxes
Net income
Earnings per common share
Earnings per common share – assuming dilution

First
Quarter

$4,778,736
310,967
274,245
168,660
.59
.58

$4,319,977
283,807
262,880
159,034
.53
.52

Second
Quarter

$4,894,921
345,412
315,128
193,804
.68
.67

$4,570,104
304,535
282,928
171,183
.58
.57

Third
Quarter

$4,838,780
191,305
158,489
108,689
.38
.37

$4,518,057
206,472
186,998
113,128
.39
.39

Fourth
Quarter(1)

$5,116,603
223,206
179,711
113,218
.38
.38

$4,848,807
426,260
404,934
244,991
.86
.85

(1) Fourth quarter of 2001 includes a $102,000,000 charge for impairment of certain assets related to aircraft programs at FedEx Express and a $22,000,000 reorganization charge at

FedEx Supply Chain Services.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders of FedEx Corporation:

We have audited the accompanying consolidated balance
sheets of FedEx Corporation (a Delaware corporation) and
subsidiaries as of May 31, 2001 and 2000, and the related consoli-
dated statements of income, changes in stockholders’ invest-
ment and comprehensive income and cash ﬂows for each of the
three years in the period ended May 31, 2001. These ﬁnancial
statements are the responsibility of FedEx’s management. Our
responsibility is to express an opinion on these ﬁnancial state-
ments based on our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assur-
ance about whether the ﬁnancial statements are free of material
misstatement. An audit includes examining, on a test basis, evi-
dence supporting the amounts and disclosures in the ﬁnancial
statements. An audit also includes assessing the accounting
principles used and signiﬁcant estimates made by management,
as well as evaluating the overall ﬁnancial statement presenta-
tion. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, the ﬁnancial statements referred to above present
fairly, in all material respects, the ﬁnancial position of FedEx
Corporation as of May 31, 2001 and 2000, and the results of its
operations and its cash ﬂows for each of the three years in the
period ended May 31, 2001, in conformity with accounting princi-
ples generally accepted in the United States.

Memphis, Tennessee
June 27, 2001

SELECTED CONSOLIDATED FINANCIAL DATA

Years ended May 31,
In thousands, except per share amounts and Other Operating Data

2001

2000

1999

1998

1997

OPERATING RESULTS
Revenues
Operating income(1)
Income from continuing operations before income taxes
Income from continuing operations
Income from discontinued operations
Net income(1)
PER SHARE DATA
Earnings per share:

Basic:

Continuing operations
Discontinued operations

Assuming dilution:

Continuing operations
Discontinued operations

Average shares of common stock outstanding
Average common and common equivalent

shares outstanding

Cash dividends(2)
FINANCIAL POSITION
Property and equipment, net
Total assets
Long-term debt, less current portion
Common stockholders’ investment
OTHER OPERATING DATA
FedEx Express:

Operating weekdays
Aircraft ﬂeet

FedEx Ground:

Operating weekdays

FedEx Freight:(3)

Operating weekdays

Average full-time equivalent employees

$19,629,040
1,070,890
927,573
584,371
–
584,371

2.02
–
2.02

1.99
–
1.99
288,745

293,179
–

$ 8,100,055
13,340,012
1,900,119
5,900,420

255
640

254

107
176,960

$18,256,945
1,221,074
1,137,740
688,336
–
688,336

2.36
–
2.36

2.32
–
2.32
291,727

296,326
–

$16,773,470
1,163,086
1,061,064
631,333
–
631,333

2.13
–
2.13

2.10
–
2.10
295,983

300,643
–

$15,872,810
1,010,660
899,518
498,155
4,875
503,030

1.70
.02
1.72

1.67
.02
1.69
293,401

298,408
–

$14,237,892
507,002
425,865
196,104
–
196,104

.67
–
.67

.67
–
.67
291,426

294,456
–

$ 7,083,527
11,527,111
1,776,253
4,785,243

$ 6,559,217
10,648,211
1,359,668
4,663,692

$ 5,935,050
9,686,060
1,385,180
3,961,230

$ 5,470,399
9,044,316
1,597,954
3,501,161

257
663

254

256
634

253

254
613

256

254
584

254

–
163,324

–
156,386

–
150,823

–
145,995

(1) Asset impairment charges of $102,000,000 ($64,770,000, net of tax) at FedEx Express and reorganization costs of $22,000,000 ($13,530,000, net of tax) at FedEx Supply Chain Services
were recorded in 2001. See Notes 15 and 16 of Notes to Consolidated Financial Statements included elsewhere herein. In connection with its 1997 restructuring, Viking recorded a
pretax asset impairment charge of $225,000,000 ($175,000,000, net of tax).

(2) Caliber declared dividends of $3,899,000 and $28,184,000 for 1998 and 1997, respectively. Caliber declared additional dividends of $10,833,000 from January 1, 1997 to May 25, 1997

that are not included in the preceding amounts. FedEx has never paid cash dividends on its common stock.

(3) FedEx Freight results for 2001 include the operations of Viking from December 1, 2000 and American Freightways from January 1, 2001. FedEx Freight statistics for 2001 include the

operations of both Viking and American Freightways from January 1, 2001.

BOARD OF DIRECTORS

James L. Barksdale(3)
Managing Partner
The Barksdale Group
Venture capital 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(3 *)
President and Chief Executive Ofﬁcer
Packet Design, Inc.
Internet technology company

F. Sheridan Garrison
Chairman Emeritus and Founder
American Freightways, Inc.

Philip Greer(1 *)
Senior Managing Director
Weiss, Peck & Greer, L.L.C.
Investment management ﬁrm

J.R. Hyde, III(2)
Chairman
Pittco Management, LLC
Investment management ﬁrm

Dr. Shirley A. Jackson(3)
President
Rensselaer Polytechnic Institute
Technological university

George J. Mitchell(1)
Special Counsel
Verner, Liipfert, Bernhard, McPherson and Hand
Law ﬁrm

Frederick W. Smith
Chairman, President and
Chief Executive Ofﬁcer
FedEx Corporation

Dr. Joshua I. Smith(1)
Chairman and Managing Partner
Coaching Group, LLC
Consulting ﬁrm

Paul S. Walsh(2)
Group Chief Executive Ofﬁcer
Diageo plc
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
(3) Information Technology Oversight Committee
(*) Committee Chair

EXECUTIVE OFFICERS

FEDEX CORPORATION

Frederick W. Smith
Chairman, President and
Chief Executive Ofﬁcer

Alan B. Graf, Jr.
Executive Vice President and
Chief Financial Ofﬁcer

Robert B. Carter
Executive Vice President and
Chief Information Ofﬁcer

FEDEX EXPRESS

David J. Bronczek
President and Chief Executive Ofﬁcer

David F. Rebholz
Executive Vice President,
Operations and Systems Support

Michael L. Ducker
Executive Vice President,
International

FEDEX FREIGHT

Douglas G. Duncan
President and Chief Executive Ofﬁcer

Thomas R. Garrison
President and Chief Executive Ofﬁcer,
American Freightways, Inc.

Tilton G. Gore
President and Chief Executive Ofﬁcer,
Viking Freight, Inc.

Kenneth R. Masterson
Executive Vice President,
General Counsel and Secretary

T. Michael Glenn
Executive Vice President,
Market Development and Corporate Communications

James S. Hudson
Corporate Vice President and
Chief Accounting Ofﬁcer

FEDEX GROUND

Daniel J. Sullivan
President and Chief Executive Ofﬁcer

Ivan T. Hofmann
Executive Vice President and
Chief Operating Ofﬁcer

Rodger G. Marticke
Executive Vice President,
Administration

FEDEX CUSTOM CRITICAL

John G. Pickard
President and Chief Executive Ofﬁcer

FEDEX TRADE NETWORKS

G. Edmond Clark
President and Chief Executive Ofﬁcer

CORPORATE INFORMATION

STOCK LISTING: FedEx Corporation’s common stock is listed on
the New York Stock Exchange under the ticker symbol FDX.

STOCKHOLDERS: At July 10, 2001, there were 17,778 stockholders
of record.

MARKET INFORMATION: Following are high and low sale prices,
by quarter, for FedEx Corporation common stock in 2001 and 2000.
We have not declared any cash dividends.

FY 2001
High
Low
FY 2000
High
Low

First
Quarter

$43.44
33.38

$57.13
38.50

Second
Quarter

$49.85
38.04

$47.31
34.88

Third
Quarter

$48.40
36.35

$47.94
33.19

Fourth
Quarter

$44.24
35.50

$42.44
30.56

CORPORATE HEADQUARTERS: 942 South Shady Grove Road,
Memphis, Tennessee 38120, (901) 818-7500.

ANNUAL MEETING: The annual meeting of stockholders will be
held at the Peabody Hotel, 149 Union Avenue, Memphis, Tennessee
on Monday, September 24, 2001, at 10:00 a.m. Central time.

GENERAL AND MEDIA INQUIRIES: Contact Shirlee M. Clark,
Director, Public Relations, FedEx Corporation, 942 South Shady
Grove Road, Memphis, Tennessee 38120, (901) 434-8400.

STOCKHOLDER ACCOUNT INQUIRIES: Contact EquiServe
Trust Company, N.A., P.O. Box 2500, Jersey City, New Jersey
07303-2500, (800) 446-2617/John H. Ruocco (312) 499-7033.

DIRECT STOCK PURCHASE INQUIRIES: For information on The
DirectServiceTM Investment Program for FedEx Corporation, call
(800) 524-3120. This program provides an alternative to traditional
retail brokerage methods of purchasing, holding, and selling
FedEx common stock.

FINANCIAL INFORMATION, INCLUDING FORM 10-K: Copies
of FedEx Corporation’s Annual Report on Form 10-K (excluding
exhibits), other documents ﬁled with the Securities and Exchange
Commission (SEC) and other ﬁnancial and statistical information
are available on our Internet Web site at fedex.com. You will be
mailed a copy of the Form 10-K upon request to Investor
Relations, FedEx Corporation, 942 South Shady Grove Road,
Memphis, Tennessee 38120, (901) 818-7200. Documents ﬁled elec-
tronically with the SEC can also be found on the Internet at the
SEC’s Web site at www.sec.gov.

INVESTMENT COMMUNITY INQUIRIES: Contact J. H. Clippard, Jr.,
Vice President, Investor Relations, FedEx Corporation, 942 South
Shady Grove Road, Memphis, Tennessee 38120, (901) 818-7200, or
visit the Company’s Web site at fedex.com.

AUDITORS: Arthur Andersen LLP, Memphis, Tennessee.

EQUAL EMPLOYMENT OPPORTUNITY: FedEx Corporation is
ﬁrmly committed to afford Equal Employment Opportunity to all
individuals 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 principles 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: FedEx,® the FedEx® logo, FedEx International
Priority® and Federal Express® are registered service marks of
Federal Express Corporation. Reg. U.S. Pat. & Tm. Off. and in cer-
tain other countries. Used under license. FedEx Insight,SM FedEx
Extra Hours,SM FedEx Global Trade Manager,SM the FedEx Express,SM
FedEx Ground,SM FedEx Custom Critical,SM Fedex Freight,SM FedEx
Trade NetworksSM and FedEx ServicesSM logos are service marks
of Federal Express Corporation. Used under license. Viking is a
service mark of Viking Freight, Inc. and American Freightways is
a service mark of American Freight Corporation.

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Portions of this annual report were printed on recycled paper.

FedEx Corporation
942 South Shady Grove Road
Memphis, Tennessee 38120
fedex.com