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EX-32.1 - EXHIBIT 32.1 - FEDERAL EXPRESS CORPc97980exv32w1.htm
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EX-31.1 - EXHIBIT 31.1 - FEDERAL EXPRESS CORPc97980exv31w1.htm
EX-31.2 - EXHIBIT 31.2 - FEDERAL EXPRESS CORPc97980exv31w2.htm
EX-32.2 - EXHIBIT 32.2 - FEDERAL EXPRESS CORPc97980exv32w2.htm
EX-12.1 - EXHIBIT 12.1 - FEDERAL EXPRESS CORPc97980exv12w1.htm
Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED February 28, 2010
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                      TO                     
Commission File Number: 1-7806
FEDERAL EXPRESS CORPORATION
(Exact name of registrant as specified in its charter)
     
Delaware
(State or other jurisdiction of incorporation or organization)
  71-0427007
(I.R.S. Employer
Identification No.)
     
3610 Hacks Cross Road    
Memphis, Tennessee   38125
(Address of principal executive offices)   (ZIP Code)
(901) 369-3600
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ     No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o Accelerated filer o  Non-accelerated filer þ
(Do not check if a smaller reporting company)
Smaller reporting company o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o     No o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o     No þ
The number of shares of common stock outstanding as of March 15, 2010 was 1,000. The Registrant is a wholly owned subsidiary of FedEx Corporation, and there is no market for the Registrant’s common stock.
The Registrant meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format permitted by General Instruction H(2).
 
 

 

 


 

FEDERAL EXPRESS CORPORATION
INDEX
         
      PAGE  
PART I. FINANCIAL INFORMATION
       
 
       
ITEM 1. Financial Statements
       
 
       
    3  
       
 
       
    5  
       
 
       
    6  
       
 
       
    7  
 
       
    13  
 
       
    14  
 
       
    21  
 
       
    21  
 
       
       
 
       
    22  
 
       
    22  
 
       
    22  
 
       
    24  
 
       
    E-1  
 
       
 Exhibit 12.1
 Exhibit 15.1
 Exhibit 31.1
 Exhibit 31.2
 Exhibit 32.1
 Exhibit 32.2

 

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FEDERAL EXPRESS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
                 
    February 28,        
    2010     May 31,  
    (Unaudited)     2009  
ASSETS
               
 
               
CURRENT ASSETS
               
Cash and cash equivalents
  $ 474     $ 360  
Receivables, less allowances of $69 and $80
    1,354       1,162  
Spare parts, supplies and fuel, less allowances of $168 and $175
    307       294  
Deferred income taxes
    356       355  
Due from parent company and other FedEx subsidiaries
    720       841  
Prepaid expenses and other
    75       82  
 
           
 
               
Total current assets
    3,286       3,094  
 
               
PROPERTY AND EQUIPMENT, AT COST
    19,322       18,202  
Less accumulated depreciation and amortization
    10,406       9,840  
 
           
 
               
Net property and equipment
    8,916       8,362  
 
OTHER LONG-TERM ASSETS
               
Goodwill
    969       903  
Other assets
    855       947  
 
           
 
               
Total other long-term assets
    1,824       1,850  
 
           
 
               
 
  $ 14,026     $ 13,306  
 
           
The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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FEDERAL EXPRESS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
                 
    February 28,        
    2010     May 31,  
    (Unaudited)     2009  
LIABILITIES AND OWNER’S EQUITY
               
 
               
CURRENT LIABILITIES
               
Current portion of long-term debt
  $ 33     $ 153  
Accrued salaries and employee benefits
    677       646  
Accounts payable
    933       835  
Accrued expenses
    983       1,029  
Due to other FedEx subsidiaries
    132       144  
 
           
 
               
Total current liabilities
    2,758       2,807  
 
               
LONG-TERM DEBT, LESS CURRENT PORTION
    656       667  
 
               
OTHER LONG-TERM LIABILITIES
               
Deferred income taxes
    1,448       1,185  
Pension, postretirement healthcare and other benefit obligations
    625       596  
Self-insurance accruals
    602       607  
Deferred lease obligations
    687       725  
Deferred gains, principally related to aircraft transactions
    272       286  
Other liabilities
    102       114  
 
           
 
               
Total other long-term liabilities
    3,736       3,513  
 
           
 
               
COMMITMENTS AND CONTINGENCIES
               
 
               
OWNER’S EQUITY
               
Common stock, $0.10 par value; 1,000 shares authorized, issued and outstanding
           
Additional paid-in capital
    608       492  
Retained earnings
    6,129       5,689  
Accumulated other comprehensive income
    139       138  
 
           
 
               
Total owner’s equity
    6,876       6,319  
 
           
 
               
 
  $ 14,026     $ 13,306  
 
           
The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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FEDERAL EXPRESS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN MILLIONS)
                                 
    Three Months Ended     Nine Months Ended  
    February 28,     February 28,  
    2010     2009     2010     2009  
 
                               
REVENUES
  $ 5,365     $ 5,010     $ 15,482     $ 17,410  
 
                               
OPERATING EXPENSES:
                               
Salaries and employee benefits
    2,076       2,018       6,053       6,109  
Purchased transportation
    268       234       773       829  
Rentals and landing fees
    392       396       1,164       1,209  
Depreciation and amortization
    251       238       749       713  
Fuel
    695       550       1,903       2,823  
Maintenance and repairs
    260       318       786       1,091  
Intercompany charges, net
    490       528       1,420       1,588  
Other
    663       683       1,920       2,142  
 
                       
 
    5,095       4,965       14,768       16,504  
 
                       
 
                               
OPERATING INCOME
    270       45       714       906  
 
                               
OTHER INCOME (EXPENSE):
                               
Interest, net
          1       13       (2 )
Other, net
    (26 )     (15 )     (66 )     (16 )
 
                       
 
    (26 )     (14 )     (53 )     (18 )
 
                       
 
                               
INCOME BEFORE INCOME TAXES
    244       31       661       888  
 
                               
PROVISION FOR INCOME TAXES
    91       32       257       365  
 
                       
 
                               
NET INCOME (LOSS)
  $ 153     $ (1 )   $ 404     $ 523  
 
                       
The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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FEDERAL EXPRESS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN MILLIONS)
                 
    Nine Months Ended  
    February 28,  
    2010     2009  
 
               
Operating Activities:
               
Net income
  $ 404     $ 523  
Noncash charges:
               
Depreciation and amortization
    749       713  
Other, net
    197       200  
Changes in assets and liabilities, net
    103       (315 )
 
           
 
               
Net cash provided by operating activities
    1,453       1,121  
 
               
Investing Activities:
               
Capital expenditures
    (1,237 )     (1,086 )
Other
    25       10  
 
           
 
               
Net cash used in investing activities
    (1,212 )     (1,076 )
 
               
Financing Activities:
               
Principal payments on debt
    (132 )     (1 )
Payment on loan from parent
          (17 )
 
           
 
               
Net cash used in financing activities
    (132 )     (18 )
 
           
 
               
Effect of exchange rate changes on cash
    5       (26 )
Net increase in cash and cash equivalents
    114       1  
Cash and cash equivalents at beginning of period
    360       298  
 
           
 
               
Cash and cash equivalents at end of period
  $ 474     $ 299  
 
           
The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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FEDERAL EXPRESS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) General
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. These interim financial statements of Federal Express Corporation (“FedEx Express”) have been prepared in accordance with accounting principles generally accepted in the United States and Securities and Exchange Commission (“SEC”) instructions for interim financial information, and should be read in conjunction with our Annual Report on Form 10-K for the year ended May 31, 2009 (“Annual Report”). Accordingly, significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed therein.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (including normal recurring adjustments) necessary to present fairly our financial position as of February 28, 2010, the results of our operations for the three- and nine-month periods ended February 28, 2010 and 2009 and cash flows for the nine-month periods ended February 28, 2010 and 2009. Operating results for the three- and nine-month periods ended February 28, 2010 are not necessarily indicative of the results that may be expected for the year ending May 31, 2010.
We are a wholly owned subsidiary of FedEx Corporation (“FedEx”) engaged in a single line of business and operate in one business segment — the worldwide express transportation and distribution of goods and documents.
Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2010 or ended May 31 of the year referenced and comparisons are to the corresponding period of the prior year.
STOCK-BASED COMPENSATION. FedEx has two types of equity-based compensation: stock options and restricted stock. The key terms of the stock option and restricted stock awards granted under FedEx’s incentive stock plans are set forth in FedEx’s Annual Report.
FedEx uses the Black-Scholes option pricing model to calculate the fair value of stock options. The value of restricted stock awards is based on the price of the stock on the grant date. We recognize stock-based compensation expense on a straight-line basis over the requisite service period of the award in the “Salaries and employee benefits” caption of our condensed consolidated income statement.
Our total stock-based compensation expense was $6 million for the three months ended February 28, 2010 and $23 million for the nine months ended February 28, 2010. Our total stock-based compensation expense was $7 million for the three months ended February 28, 2009 and $23 million for the nine months ended February 28, 2009. This amount represents the amount charged to us by FedEx for awards granted to our employees.
LONG-TERM DEBT. Long-term debt, exclusive of capital leases, had carrying values of $540 million compared with an estimated fair value of $638 million at February 28, 2010, and $539 million compared with an estimated fair value of $560 million at May 31, 2009. The estimated fair values were determined based on quoted market prices or on the current rates offered for debt with similar terms and maturities.
NEW ACCOUNTING GUIDANCE. New accounting rules and disclosure requirements can significantly impact our reported results and the comparability of our financial statements. We believe the following new accounting guidance is relevant to the readers of our financial statements.
On June 1, 2008, we adopted the authoritative guidance issued by the Financial Accounting Standards Board (“FASB”) on fair value measurements, which provides a common definition of fair value, establishes a uniform framework for measuring fair value and requires expanded disclosures about fair value measurements. On June 1, 2009, we implemented the previously deferred provisions of this guidance for nonfinancial assets and liabilities recorded at fair value, as required. The adoption of this new guidance had no impact on our financial statements.

 

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In December 2007, the FASB issued authoritative guidance on business combinations and the accounting and reporting for noncontrolling interests (previously referred to as minority interests). This guidance significantly changed the accounting for and reporting of business combination transactions, including noncontrolling interests. For example, the acquiring entity is now required to recognize the full fair value of assets acquired and liabilities assumed in the transaction, and the expensing of most transaction and restructuring costs is now required. This guidance became effective for us beginning June 1, 2009 and had no material impact on our financial statements because we have not had any significant business combinations since that date.
In December 2008, the FASB issued authoritative guidance on employers’ disclosures about postretirement benefit plan assets. This guidance provides objectives that an employer should consider when providing detailed disclosures about assets of a defined benefit pension or other postretirement plan, including disclosures about investment policies and strategies, categories of plan assets, significant concentrations of risk and the inputs and valuation techniques used to measure the fair value of plan assets. This guidance will be effective for our 2010 Annual Report.
In April 2009, the FASB issued new accounting guidance related to interim disclosures about the fair value of financial instruments. This guidance requires disclosures about the fair value of financial instruments for interim reporting periods in addition to annual reporting periods and became effective for us beginning with the first quarter of fiscal year 2010.
(2) Comprehensive Income
The following table provides a reconciliation of net income reported in our financial statements to comprehensive income for the periods ended February 28 (in millions):
                 
    Three Months Ended  
    2010     2009  
 
               
Net income (loss)
  $ 153     $ (1 )
Other comprehensive income:
               
Foreign currency translation adjustments, net of tax benefit of $5 in 2010 and $1 in 2009
    (27 )     (4 )
Amortization of unrealized pension actuarial gains/losses
    (2 )     (1 )
 
           
 
               
Comprehensive income (loss)
  $ 124     $ (6 )
 
           
 
               
                 
    Nine Months Ended  
    2010     2009  
 
               
Net income
  $ 404     $ 523  
Other comprehensive income:
               
Foreign currency translation adjustments, net of tax of $6 in 2010 and benefit of $31 in 2009
    7       (170 )
Amortization of unrealized pension actuarial gains/losses, net of tax of $1 in 2010 and 2009
    (6 )     (2 )
 
           
 
               
Comprehensive income
  $ 405     $ 351  
 
           

 

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(3) Retirement Plans
We sponsor or participate in programs that provide retirement benefits to most of our employees. These programs include defined benefit pension plans, defined contribution plans and postretirement healthcare plans. A majority of our employees are covered by the FedEx Corporation Employees’ Pension Plan (“FedEx Plan”), a defined benefit pension plan sponsored by FedEx. The FedEx Plan covers certain U.S. employees age 21 and over with at least one year of service and provides benefits primarily based on earnings, age and years of service. Defined contribution plans covering a majority of U.S. employees and certain international employees are in place. We also sponsor or participate in nonqualified benefit plans covering certain of our U.S. employee groups and other pension plans covering certain of our international employees. For more information, refer to the financial statements of FedEx included in its Form 10-Q for the quarter ended February 28, 2010.
Our retirement plans costs for the periods ended February 28 were as follows (in millions):
                                 
    Three Months Ended     Nine Months Ended  
    2010     2009     2010     2009  
Pension plans sponsored by FedEx
  $ 39     $ 12     $ 118     $ 36  
Other U.S. domestic and international pension plans
    8       7       26       26  
U.S. domestic and international defined contribution plans
    31       37       75       137  
Postretirement healthcare plans
    9       12       26       36  
 
                       
 
                               
 
  $ 87     $ 68     $ 245     $ 235  
 
                       
The increase in pension costs for the plans sponsored by FedEx for the three- and nine-month periods ended February 28, 2010 reflects the negative impact of market conditions on pension plan assets at the May 31, 2009 measurement date. This increase in pension costs was offset by lower expenses for our 401(k) plans due to the temporary suspension of the company-matching contributions, as described in our Annual Report. Those matching contributions were reinstated at 50% of their normal levels on January 1, 2010.
The components of the net periodic benefit cost of the pension and postretirement healthcare plans currently sponsored by us were individually immaterial for all periods presented. No material contributions were made during the first nine months of 2010 or 2009 to pension plans sponsored by us, and we do not expect to make material contributions in 2010.

 

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(4) Commitments
As of February 28, 2010, our purchase commitments under various contracts for the remainder of 2010 and annually thereafter were as follows (in millions):
                                 
            Aircraft              
    Aircraft(1)     Related(2)     Other(3)     Total  
2010 (remainder)
  $ 53     $ 100     $ 13     $ 166  
2011
    789       47       27       863  
2012
    585       10       15       610  
2013
    365       19       11       395  
2014
    466             10       476  
Thereafter
    1,923             91       2,014  
     
(1)   Our obligation to purchase 15 of these aircraft (Boeing 777 Freighters, or B777Fs) is conditioned upon there being no event that causes us or our employees not to be covered by the Railway Labor Act of 1926, as amended.
 
(2)   Primarily aircraft modifications.
 
(3)   Primarily advertising and promotions contracts.
The amounts reflected in the table above for purchase commitments represent noncancelable agreements to purchase goods or services. Commitments to purchase aircraft in passenger configuration do not include the attendant costs to modify these aircraft for cargo transport unless we have entered into noncancelable commitments to modify such aircraft. Open purchase orders that are cancelable are not considered unconditional purchase obligations for financial reporting purposes and are not included in the table above.
We had $499 million in deposits and progress payments as of February 28, 2010 (a decrease of $45 million from May 31, 2009) on aircraft purchases and other planned aircraft-related transactions. These deposits are classified in the “Other assets” caption of our condensed consolidated balance sheets. In addition to our commitment to purchase B777Fs, our aircraft purchase commitments include the Boeing 757 (“B757”) in passenger configuration, which will require additional costs to modify for cargo transport. Aircraft and aircraft-related contracts are subject to price escalations.

 

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The following table is a summary of the number and type of aircraft we are committed to purchase as of February 28, 2010, with the year of expected delivery:
                         
    B757     B777F(1)     Total  
 
                       
2010 (remainder)
          1       1  
2011
    18       4       22  
2012
    8       4       12  
2013
          2       2  
2014
          3       3  
Thereafter
          13       13  
 
                 
Total
    26       27       53  
 
                 
     
(1)   Our obligation to purchase 15 of these aircraft is conditioned upon there being no event that causes us or our employees not to be covered by the Railway Labor Act of 1926, as amended.
A summary of future minimum lease payments under capital leases and noncancelable operating leases with an initial or remaining term in excess of one year at February 28, 2010 is as follows (in millions):
                                 
            Operating Leases  
            Aircraft             Total  
    Capital     and Related     Facilities     Operating  
    Leases     Equipment     and Other     Leases  
 
                               
2010 (remainder)
  $ 24     $ 105     $ 157     $ 262  
2011
    18       526       576       1,102  
2012
    6       504       506       1,010  
2013
    117       499       441       940  
2014
          473       383       856  
Thereafter
          2,458       3,405       5,863  
 
                       
Total
    165     $ 4,565     $ 5,468     $ 10,033  
 
                         
 
                               
Less amount representing interest
    16                          
 
                             
Present value of net minimum lease payments
  $ 149                          
 
                             
While certain of our lease agreements contain covenants governing the use of the leased assets or require us to maintain certain levels of insurance, none of our lease agreements include material financial covenants or limitations.
(5) Contingencies
Wage-and-Hour. We are a defendant in a number of lawsuits containing various class-action allegations of wage-and-hour violations. The plaintiffs in these lawsuits allege, among other things, that they were forced to work “off the clock,” were not paid overtime or were not provided work breaks or other benefits. The complaints generally seek unspecified monetary damages, injunctive relief, or both.
In April 2009, in one of these wage-and-hour cases, Bibo v. FedEx Express, a California federal court granted class certification, certifying several subclasses of our couriers in California from April 14, 2006 (the date of the settlement of the Foster class action) to the present. The plaintiffs allege that we violated California wage-and-hour laws after the date of the Foster settlement. In particular, the plaintiffs allege, among other things, that they were forced to work “off the clock” and were not provided with required meal breaks or split-shift premiums. We asked the U.S. Court of Appeals for the Ninth Circuit to accept a discretionary appeal of the class certification order, but the court refused to accept it at this time.

 

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This class certification ruling does not address whether we will ultimately be held liable. We have denied any liability and intend to vigorously defend ourselves in these wage-and-hour lawsuits. We do not believe that any loss is probable in these lawsuits.
ATA Airlines. ATA Airlines has sued us in Indiana federal court alleging that we breached a contract by not including ATA on our 2009 Civil Reserve Air Fleet (CRAF)/Air Mobility Command (AMC) team, which provides cargo and passenger service to the U.S. military. After being advised that it would not be a part of the 2009 team, ATA ceased operations and filed for bankruptcy. ATA has alleged damages of $106 million, including lost profits, aircraft acquisition costs and bankruptcy-related expenses. We have denied any liability and contend that ATA has suffered no damages. Trial is currently scheduled for July 2010, and we still do not believe that any loss is probable.
Other. FedEx Express and its subsidiaries are subject to other legal proceedings that arise in the ordinary course of their business. In the opinion of management, the aggregate liability, if any, with respect to these other actions will not have a material adverse effect on our financial position, results of operations or cash flows.
(6) Parent/Affiliate Transactions
Affiliate company balances that are currently receivable or payable relate to charges for services provided to or by other FedEx affiliates, which are settled on a monthly basis, or the net activity from participation in FedEx’s consolidated cash management program. In addition, we are allocated net interest on these amounts at market rates.
We maintain an accounts receivable arrangement with FedEx Customer Information Services, Inc. (“FCIS”), a wholly owned subsidiary of FedEx Corporate Services, Inc. (“FedEx Services”). FedEx Services is a wholly owned subsidiary of FedEx. Under this arrangement, FCIS records and collects receivables associated with our U.S. customers, while we continue to recognize revenue for the transportation services provided. Our net receivables recorded by FCIS totaled $1.2 billion at February 28, 2010 and $1.0 billion at May 31, 2009.
The costs of the FedEx Services segment are allocated to us and are included in the expense line item “Intercompany charges” based on metrics such as relative revenues or estimated services provided. We believe these allocations approximate the net cost of the functions provided by the FedEx Services segment.
(7) Supplemental Cash Flow Information
The following table presents supplemental cash flow information for the nine-month periods ended February 28 (in millions):
                 
    2010     2009  
 
               
Cash payments for:
               
Interest (net of capitalized interest)
  $ 2     $ 19  
 
           
 
               
Income taxes
  $ 196     $ 337  
Income tax refunds received
    (141 )     (62 )
 
           
Cash tax payments, net
  $ 55     $ 275  
 
           

 

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REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholder
Federal Express Corporation
We have reviewed the condensed consolidated balance sheet of Federal Express Corporation as of February 28, 2010, and the related condensed consolidated statements of operations for the three-month and nine-month periods ended February 28, 2010 and 2009 and the condensed consolidated cash flows for the nine-month periods ended February 28, 2010 and 2009. These financial statements are the responsibility of the Company’s management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Federal Express Corporation as of May 31, 2009, and the related consolidated statements of income, changes in owner’s equity and comprehensive income, and cash flows for the year then ended not presented herein, and in our report dated July 10, 2009, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of May 31, 2009, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
         
     
  /s/ Ernst & Young LLP    
     
Memphis, Tennessee
March 19, 2010

 

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Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition
GENERAL
The following Management’s Discussion and Analysis of Results of Operations and Financial Condition, which describes the principal factors affecting the results of operations and financial condition of Federal Express Corporation (“FedEx Express”), is abbreviated pursuant to General Instruction H(2)(a) of Form 10-Q. This discussion should be read in conjunction with the accompanying quarterly unaudited condensed consolidated financial statements and our Annual Report on Form 10-K for the year ended May 31, 2009 (“Annual Report”). Our Annual Report includes additional information about our significant accounting policies, practices and the transactions that underlie our financial results. For additional information, including a discussion of outlook, liquidity, capital resources, contractual cash obligations and critical accounting estimates, see the Quarterly Report on Form 10-Q of our parent, FedEx Corporation (“FedEx”), for the quarter ended February 28, 2010.
We are the world’s largest express transportation company. Our sister company FedEx Corporate Services, Inc. (“FedEx Services”) provides customer-facing sales, marketing, information technology and customer service support to us, our sister company FedEx Ground Package System, Inc. (“FedEx Ground”), and our other sister companies, as well as retail access for our customers through FedEx Office and Print Services, Inc. (“FedEx Office”).
The operating expenses line item “Intercompany charges” on the financial summary represents an allocation that primarily includes salaries and benefits, depreciation and other costs for the sales, marketing, information technology and customer service support provided to us by FedEx Services and FedEx Office’s net operating costs. These costs are allocated based on metrics such as relative revenues or estimated services provided. “Intercompany charges” also includes allocated charges from our parent for management fees related to services received for general corporate oversight, including executive officers and certain legal and finance functions. We believe the total amounts allocated reasonably reflect the cost of providing these functions.
The key indicators necessary to understand our operating results include:
  the overall customer demand for our various services;
 
  the volume of shipments transported through our network, as measured by our average daily volume and shipment weight;
 
  the mix of services purchased by our customers;
 
  the prices we obtain for our services, as measured by average revenue per package (yield);
 
  our ability to manage our cost structure (capital expenditures and operating expenses) to match shifting volume levels; and
 
  the timing and amount of fluctuations in fuel prices and our ability to recover incremental fuel costs through our fuel surcharges.
The majority of our operating expenses are directly impacted by revenue and volume levels. Accordingly, we expect these operating expenses to fluctuate on a year-over-year basis consistent with the change in revenues and volume. The following discussion of operating expenses describes the key drivers impacting expense trends beyond changes in revenues and volume.
Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2010 or ended May 31 of the year referenced and comparisons are to the corresponding period of the prior year.

 

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RESULTS OF OPERATIONS
The following tables compare revenues, operating expenses, operating expenses as a percent of revenue, operating income, net income (loss) and operating margin (dollars in millions) for the three- and nine-month periods ended February 28:
                                                 
    Three Months Ended     Percent     Nine Months Ended     Percent  
    2010     2009     Change     2010     2009     Change  
Revenues:
                                               
Package:
                                               
U.S. overnight box
  $ 1,413     $ 1,410           $ 4,116     $ 4,740       (13 )
U.S. overnight envelope
    400       426       (6 )     1,203       1,437       (16 )
U.S. deferred
    692       682       1       1,919       2,184       (12 )
 
                                       
Total U.S. domestic package revenue
    2,505       2,518       (1 )     7,238       8,361       (13 )
 
                                       
International priority
    1,748       1,507       16       5,105       5,481       (7 )
International domestic (1)
    142       117       21       427       445       (4 )
 
                                       
Total package revenue
    4,395       4,142       6       12,770       14,287       (11 )
Freight:
                                               
U.S.
    525       523             1,464       1,715       (15 )
International priority
    329       221       49       910       884       3  
International airfreight
    61       69       (12 )     185       311       (41 )
 
                                       
Total freight revenue
    915       813       13       2,559       2,910       (12 )
Other (2)
    55       55             153       213       (28 )
 
                                       
Total revenues
    5,365       5,010       7       15,482       17,410       (11 )
Operating expenses:
                                               
Salaries and employee benefits
    2,076       2,018       3       6,053       6,109       (1 )
Purchased transportation
    268       234       15       773       829       (7 )
Rentals and landing fees
    392       396       (1 )     1,164       1,209       (4 )
Depreciation and amortization
    251       238       5       749       713       5  
Fuel
    695       550       26       1,903       2,823       (33 )
Maintenance and repairs
    260       318       (18 )     786       1,091       (28 )
Intercompany charges
    490       528       (7 )     1,420       1,588       (11 )
Other
    663       683       (3 )     1,920       2,142       (10 )
 
                                       
Total operating expenses
    5,095       4,965       3       14,768       16,504       (11 )
 
                                       
Operating income
  $ 270     $ 45       500     $ 714     $ 906       (21 )
 
                                       
 
                                               
Operating margin
    5.0 %     0.9 %     410 bp     4.6 %     5.2 %     (60 )bp
 
                                               
Other income (expense):
                                               
Interest, net
          1     NM       13       (2 )   NM  
Other, net
    (26 )     (15 )   NM       (66 )     (16 )   NM  
 
                                       
 
    (26 )     (14 )   NM       (53 )     (18 )   NM  
 
                                       
 
                                               
Income before income taxes
    244       31       687       661       888       (26 )
 
                                               
Provision for income taxes
    91       32       184       257       365       (30 )
 
                                       
 
                                               
Net income (loss)
  $ 153     $ (1 )   NM     $ 404     $ 523       (23 )
 
                                       
     
(1)   International domestic revenues include our international domestic operations, primarily in the United Kingdom, Canada, China, India and Mexico.

 

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    Percent of Revenue (1)     Percent of Revenue (1)  
    Three     Three     Nine     Nine  
    Months     Months     Months     Months  
    Ended     Ended     Ended     Ended  
    2010     2009     2010     2009  
Operating expenses:
                               
Salaries and employee benefits
    38.7 %     40.3 %     39.1 %     35.1 %
Purchased transportation
    5.0       4.7       5.0       4.8  
Rentals and landing fees
    7.3       7.9       7.5       6.9  
Depreciation and amortization
    4.7       4.8       4.8       4.1  
Fuel
    13.0       11.0       12.3       16.2  
Maintenance and repairs
    4.8       6.3       5.1       6.3  
Intercompany charges
    9.1       10.5       9.2       9.1  
Other
    12.4       13.6       12.4       12.3  
 
                       
Total operating expenses
    95.0       99.1       95.4       94.8  
 
                       
Operating margin
    5.0 %     0.9 %     4.6 %     5.2 %
 
                       
     
(1)   Given the fixed-cost structure of our transportation networks, the year-over-year comparison of our operating expenses as a percentage of revenue has been affected by a number of factors, including the impact of lower fuel surcharges, weak economic conditions and our cost-containment activities. Collectively, these factors have distorted the comparability of certain of our operating expense captions on a relative basis.
The following table compares selected statistics (in thousands, except yield amounts) for the three- and nine-month periods ended February 28:
                                                 
    Three Months Ended     Percent     Nine Months Ended     Percent  
    2010     2009     Change     2010     2009     Change  
Package Statistics
                                               
Average daily package volume (ADV):
                                               
U.S. overnight box
    1,190       1,177       1       1,157       1,122       3  
U.S. overnight envelope
    601       622       (3 )     608       621       (2 )
U.S. deferred
    949       907       5       876       855       2  
 
                                       
Total U.S. domestic ADV
    2,740       2,706       1       2,641       2,598       2  
 
                                       
International priority
    530       450       18       511       482       6  
International domestic(1)
    317       281       13       315       300       5  
 
                                       
Total ADV
    3,587       3,437       4       3,467       3,380       3  
 
                                       
Revenue per package (yield):
                                               
U.S. overnight box
  $ 19.16     $ 19.02       1     $ 18.73     $ 22.24       (16 )
U.S. overnight envelope
    10.70       10.85       (1 )     10.41       12.18       (15 )
U.S. deferred
    11.77       11.94       (1 )     11.53       13.44       (14 )
U.S. domestic composite
    14.74       14.77             14.43       16.94       (15 )
International priority
    53.23       53.12             52.59       59.89       (12 )
International domestic(1)
    7.22       6.63       9       7.12       7.81       (9 )
Composite package yield
    19.76       19.13       3       19.39       22.25       (13 )
Freight Statistics
                                               
Average daily freight pounds:
                                               
U.S.
    7,906       7,664       3       7,217       7,431       (3 )
International priority
    2,577       1,590       62       2,427       2,041       19  
International airfreight
    1,184       1,251       (5 )     1,230       1,575       (22 )
 
                                       
Total average daily freight pounds
    11,667       10,505       11       10,874       11,047       (2 )
 
                                       
Revenue per pound (yield):
                                               
U.S.
  $ 1.07     $ 1.08       (1 )   $ 1.07     $ 1.22       (12 )
International priority
    2.06       2.21       (7 )     1.97       2.28       (14 )
International airfreight
    0.84       0.88       (5 )     0.79       1.04       (24 )
Composite freight yield
    1.26       1.23       2       1.24       1.39       (11 )
     
(1)   International domestic statistics include our international domestic operations, primarily in the United Kingdom, Canada, China, India and Mexico.

 

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Revenues
Our revenues increased 7% in the third quarter of 2010 due to increased FedEx International Priority® (“IP”) package volume, particularly from Asia, IP freight volume and U.S. domestic package volume as a result of continued improvement in global economic conditions. The impact of one fewer operating day partially offset the increase in revenue in the third quarter of 2010. Our revenues decreased 11% in the nine months of 2010 due to lower yields primarily driven by a decrease in fuel surcharges. Yield decreases during the nine months of 2010 were partially offset by increased IP package volume, particularly from Asia, IP freight volume and U.S. domestic package volume.
IP package yield increased in the third quarter of 2010 due to higher package weights and favorable exchange rates, partially offset by a lower rate per pound. International domestic yield increased during the third quarter of 2010 due to favorable exchange rates, partially offset by a lower rate per pound. U.S. domestic package yield decreased in the third quarter of 2010 due to lower fuel surcharges, partially offset by increased package weights.
Lower fuel surcharges were the primary driver of decreased composite package and freight yield in the nine months of 2010. Our weighted-average U.S. domestic and outbound fuel surcharge was 5.70% in the nine months of 2010, compared with 23.06% in the nine months of 2009. U.S. domestic package yield also declined during the nine months of 2010 due to a lower rate per pound and lower package weights. In addition to lower fuel surcharges, IP package yield decreased during the nine months of 2010 due to lower rates, partially offset by favorable exchange rates. International domestic yield decreased during the nine months of 2010 due to lower rates and lower fuel surcharges.
Our fuel surcharges are indexed to the spot price for jet fuel. Using this index, the U.S. domestic and outbound fuel surcharge and the international fuel surcharges ranged as follows for the three- and nine-month periods ended February 28:
                                 
    Three Months Ended     Nine Months Ended  
    2010     2009     2010     2009  
U.S. Domestic and Outbound Fuel Surcharge:
                               
Low
    6.50 %     1.00 %     1.00 %     1.00 %
High
    8.50       15.00       8.50       34.50  
Weighted-average
    7.42       8.24       5.70       23.06  
 
                               
International Fuel Surcharges:
                               
Low
    6.50       1.00       1.00       1.00  
High
    13.00       15.00       13.00       34.50  
Weighted-average
    10.25       10.57       9.09       20.37  
On January 4, 2010, we implemented a 5.9% average list price increase on our U.S. domestic and U.S. outbound express package and freight shipments and made various changes to other surcharges, while we lowered our fuel surcharge index by two percentage points. Furthermore, in connection with these changes, the structure of our fuel surcharge table was modified. On January 5, 2009, we implemented a 6.9% average list price increase on our U.S. domestic and U.S. outbound express package and freight shipments and made various changes to other surcharges, while we lowered our fuel surcharge index by two percentage points.
Operating Income
Our operating income and operating margin increased during the third quarter of 2010 due to volume growth, particularly in higher-margin IP package and freight services. Our operating income and operating margin decreased in the nine months of 2010 as a result of significantly lower fuel surcharges (described below) and a competitive pricing environment driven by global economic conditions. Continued reductions in network operating costs driven by lower flight hours and improved route efficiencies, as well as other actions to control spending, positively impacted our results for the third quarter and nine months of 2010.

 

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Fuel costs increased 26% during the third quarter of 2010 due to an increase in the average price per gallon of fuel. Fuel costs decreased 33% in the nine months of 2010 due to decreases in the average price per gallon of fuel and fuel consumption. Based on a static analysis of the net impact of year-over-year changes in fuel prices compared to year-over-year changes in fuel surcharges, fuel had a significant negative impact to operating income in the third quarter and nine months of 2010. This analysis considers the estimated impact of the reduction in fuel surcharges included in the base rates charged for our services.
Purchased transportation costs increased 15% in the third quarter of 2010 due to IP package volume growth, which requires a higher utilization of contract pickup and delivery services. Purchased transportation costs decreased 7% in the nine months of 2010 due to lower utilization of third-party transportation providers (primarily in international locations). Maintenance and repairs expense decreased 18% in the third quarter of 2010 and 28% in the nine months of 2010 primarily due to the timing of maintenance events. Lower aircraft utilization as a result of weak economic conditions lengthened maintenance cycles; however, higher maintenance costs are expected in future periods as aircraft become more highly utilized. Depreciation expense increased 5% in the third quarter and nine months of 2010 primarily due to the addition of 20 new aircraft into service since the third quarter of 2009. Other operating expenses decreased 3% in the third quarter of 2010 and 10% in the nine months of 2010 primarily due to actions to control spending. Intercompany charges decreased 7% in the third quarter of 2010 and 11% in the nine months of 2010 primarily due to lower net operating costs at FedEx Office and lower allocated information technology costs.
Other Income and Income Taxes
Interest expense decreased during the nine months of 2010 primarily due to increased capitalized interest primarily related to progress payments on aircraft purchases. Other expense increased during the third quarter and nine months of 2010 primarily due to higher management fees. A foreign currency loss resulting from the requirement to account for Venezuela as a highly inflationary economy and a 50% devaluation of the Venezuelan Bolivar versus the U.S. dollar also contributed to the increase in other expense during the third quarter of 2010.
Our effective tax rate was 37.3% for the third quarter of 2010 and 100.7% for the third quarter of 2009. The higher rate in the third quarter of 2009 was principally due to lower pre-tax income during that quarter. Our effective tax rate was 38.8% for the nine months of 2010 and 41.0% for the nine months of 2009. The rates in the nine months of 2009 and 2010 were favorably impacted by the resolution of immaterial state and federal income tax matters during those periods. For the remainder of 2010, we expect the effective tax rate to be approximately 40%. The actual rate, however, will depend on a number of factors, including the amount and source of operating income.
As of February 28, 2010, there were no material changes to our liabilities for unrecognized tax benefits from May 31, 2009. The Internal Revenue Service is currently auditing FedEx’s 2007 and 2008 U.S. income tax returns.
We file income tax returns in the U.S. and various U.S. states and foreign jurisdictions. It is reasonably possible that certain U.S. federal, U.S. state and foreign jurisdiction income tax return proceedings will be completed during the next 12 months and could result in a change in our balance of unrecognized tax benefits. An estimate of the range of the change cannot be made at this time. The expected impact of any changes would not be material to our consolidated financial statements.
NEW ACCOUNTING GUIDANCE
New accounting rules and disclosure requirements can significantly impact our reported results and the comparability of our financial statements. We believe the following new accounting guidance is relevant to the readers of our financial statements.
On June 1, 2008, we adopted the authoritative guidance issued by the Financial Accounting Standards Board (“FASB”) on fair value measurements, which provides a common definition of fair value, establishes a uniform framework for measuring fair value and requires expanded disclosures about fair value measurements. On June 1, 2009, we implemented the previously deferred provisions of this guidance for nonfinancial assets and liabilities recorded at fair value, as required. The adoption of this new guidance had no impact on our financial statements.

 

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In December 2007, the FASB issued authoritative guidance on business combinations and the accounting and reporting for noncontrolling interests (previously referred to as minority interests). This guidance significantly changed the accounting for and reporting of business combination transactions, including noncontrolling interests. For example, the acquiring entity is now required to recognize the full fair value of assets acquired and liabilities assumed in the transaction, and the expensing of most transaction and restructuring costs is now required. This guidance became effective for us beginning June 1, 2009 and had no material impact on our financial statements because we have not had any significant business combinations since that date.
In December 2008, the FASB issued authoritative guidance on employers’ disclosures about postretirement benefit plan assets. This guidance provides objectives that an employer should consider when providing detailed disclosures about assets of a defined benefit pension or other postretirement plan, including disclosures about investment policies and strategies, categories of plan assets, significant concentrations of risk and the inputs and valuation techniques used to measure the fair value of plan assets. This guidance will be effective for our 2010 Annual Report.
In April 2009, the FASB issued new accounting guidance related to interim disclosures about the fair value of financial instruments. This guidance requires disclosures about the fair value of financial instruments for interim reporting periods in addition to annual reporting periods and became effective for us beginning with the first quarter of fiscal year 2010.
FORWARD-LOOKING STATEMENTS
Certain statements in this report are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations, cash flows, plans, objectives, future performance and business. Forward-looking statements include those preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believes,” “expects,” “anticipates,” “plans,” “estimates,” “targets,” “projects,” “intends” or similar expressions. These forward-looking statements involve risks and uncertainties. Actual results may differ materially from those contemplated (expressed or implied) by such forward-looking statements, because of, among other things, potential risks and uncertainties, such as:
  economic conditions in the global markets in which we operate;
 
  the impact of any international conflicts or terrorist activities on the United States and global economies in general, the transportation industry or us in particular, and what effects these events will have on our costs or the demand for our services;
 
  damage to our reputation or loss of brand equity;
 
  disruptions to the Internet or our technology infrastructure, including those impacting our computer systems and Web site, which can adversely affect shipment levels;
 
  the price and availability of jet and vehicle fuel;
 
  the impact of intense competition on our ability to maintain or increase our prices (including our fuel surcharges in response to rising fuel costs) or to maintain or grow our market share;
 
  our ability to manage our cost structure for capital expenditures and operating expenses, and match it to shifting and future customer volume levels;

 

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  our ability to effectively operate, integrate, leverage and grow acquired businesses;
 
  any impacts on our businesses resulting from new domestic or international government laws and regulation, including regulatory actions affecting global aviation rights, increased air cargo and other security requirements, and tax, accounting, trade (such as protectionist measures enacted in response to the current weak economic conditions), labor (such as changes to the Railway Labor Act affecting our employees), environmental (such as climate change legislation) or postal rules;
 
  changes in foreign currency exchange rates, especially in the euro, Chinese yuan, Canadian dollar, British pound and Japanese yen, which can affect our sales levels and foreign currency sales prices;
 
  any liability resulting from and the costs of defending against class-action litigation, such as wage-and-hour and discrimination and retaliation claims, and any other legal proceedings;
 
  our ability to maintain good relationships with our employees and prevent attempts by labor organizations to organize groups of our employees, which could significantly increase our operating costs and reduce our operational flexibility;
 
  increasing costs, the volatility of costs and legal mandates for employee benefits, especially pension and healthcare benefits;
 
  significant changes in the volume of shipments transported through our network, customer demand for our various services or the prices we obtain for our services;
 
  market acceptance of our new service and growth initiatives;
 
  the impact of technology developments on our operations and on demand for our services;
 
  adverse weather conditions or natural disasters, such as earthquakes and hurricanes, which can disrupt electrical service, damage our property, disrupt our operations, increase fuel costs and adversely affect shipment levels;
 
  widespread outbreak of an illness or any other communicable disease, or any other public health crisis;
 
  availability of financing on terms acceptable to FedEx and FedEx’s ability to maintain its current credit ratings, especially given the capital intensity of our operations and the current volatility of credit markets;
 
  credit losses from our customers’ inability or unwillingness to pay for previously provided services as a result of, among other things, weak economic conditions and tight credit markets; and
 
  other risks and uncertainties you can find in FedEx’s and our press releases and SEC filings, including the risk factors identified under the heading “Risk Factors” in “Management’s Discussion and Analysis of Results of Operations and Financial Condition” in our Annual Report, as updated by our quarterly reports on Form 10-Q.
As a result of these and other factors, no assurance can be given as to our future results and achievements. Accordingly, a forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. You should not place undue reliance on forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Omitted under the reduced disclosure format permitted by General Instruction H(2)(c) of Form 10-Q.
Item 4. Controls and Procedures
Our management, with the participation of our principal executive and financial officers, has evaluated the effectiveness of our disclosure controls and procedures in ensuring that the information required to be disclosed in our filings under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and financial officers have concluded that such disclosure controls and procedures were effective as of February 28, 2010 (the end of the period covered by this Quarterly Report on Form 10-Q).
During our fiscal quarter ended February 28, 2010, no change occurred in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For a description of all material pending legal proceedings, see Note 5 of the accompanying condensed consolidated financial statements.
Item 1A. Risk Factors
There have been no material changes from the risk factors disclosed in our Annual Report (under the heading “Risk Factors” in “Management’s Discussion and Analysis of Results of Operations and Financial Condition”) in response to Part I, Item 1A of Form 10-K.
Item 6. Exhibits
     
Exhibit    
Number   Description of Exhibit
 
   
10.1
  First Amendment dated December 29, 2009 (but effective as of September 1, 2008) to the Composite Lease Agreement dated May 21, 2007 (but effective as of January 1, 2007) between the Memphis-Shelby County Airport Authority and Federal Express Corporation. (Filed as Exhibit 10.1 to FedEx Corporation’s FY10 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
 
   
10.2
  First Amendment dated December 29, 2009 (but effective as of September 1, 2008) to the Special Facility Ground Lease Agreement dated as of July 1, 1993 between the Memphis-Shelby County Airport Authority and Federal Express Corporation. (Filed as Exhibit 10.2 to FedEx Corporation’s FY10 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
 
   
10.3
  Supplemental Agreement No. 5 dated as of January 11, 2010 to the Boeing 777 Freighter Purchase Agreement dated as of November 7, 2006 between The Boeing Company and Federal Express Corporation. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.3 to FedEx Corporation’s FY10 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
 
   
10.4
  Amendment dated December 8, 2009 to the Transportation Agreement dated July 31, 2006 between the United States Postal Service and Federal Express Corporation. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.4 to FedEx Corporation’s FY10 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
 
   
12.1
  Computation of Ratio of Earnings to Fixed Charges.
 
   
15.1
  Letter re: Unaudited Interim Financial Statements.
 
   
31.1
  Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
31.2
  Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

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Exhibit    
Number   Description of Exhibit
 
   
32.1
  Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
   
32.2
  Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
         
  FEDERAL EXPRESS CORPORATION
 
 
Date: March 19, 2010  /s/ J. RICK BATEMAN    
  J. RICK BATEMAN   
  VICE PRESIDENT AND
WORLDWIDE CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER) 
 

 

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EXHIBIT INDEX
     
Exhibit    
Number   Description of Exhibit
 
   
10.1
  First Amendment dated December 29, 2009 (but effective as of September 1, 2008) to the Composite Lease Agreement dated May 21, 2007 (but effective as of January 1, 2007) between the Memphis-Shelby County Airport Authority and Federal Express Corporation. (Filed as Exhibit 10.1 to FedEx Corporation’s FY10 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
 
   
10.2
  First Amendment dated December 29, 2009 (but effective as of September 1, 2008) to the Special Facility Ground Lease Agreement dated as of July 1, 1993 between the Memphis-Shelby County Airport Authority and Federal Express Corporation. (Filed as Exhibit 10.2 to FedEx Corporation’s FY10 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
 
   
10.3
  Supplemental Agreement No. 5 dated as of January 11, 2010 to the Boeing 777 Freighter Purchase Agreement dated as of November 7, 2006 between The Boeing Company and Federal Express Corporation. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.3 to FedEx Corporation’s FY10 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
 
   
10.4
  Amendment dated December 8, 2009 to the Transportation Agreement dated July 31, 2006 between the United States Postal Service and Federal Express Corporation. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.4 to FedEx Corporation’s FY10 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
 
   
12.1
  Computation of Ratio of Earnings to Fixed Charges.
 
   
15.1
  Letter re: Unaudited Interim Financial Statements.
 
   
31.1
  Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
31.2
  Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
32.1
  Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
   
32.2
  Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

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