Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED November 30, 2014

OR

 

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                      TO                     

Commission File Number: 1-7806

FEDERAL EXPRESS CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware		71-0427007
(State or other jurisdiction of incorporation or organization)		(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 x No ¨

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 x No ¨

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 ¨		Accelerated filer ¨		Non-accelerated filer x		Smaller reporting company ¨
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of common stock outstanding as of December 17, 2014 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).

 

 

 

---

Table of Contents

FEDERAL EXPRESS CORPORATION

INDEX

PART I. FINANCIAL INFORMATION

 

		PAGE
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets November 30, 2014 and May 31, 2014			3
Condensed Consolidated Statements of Income Three and Six Months Ended November 30, 2014 and 2013			5
Condensed Consolidated Statements of Comprehensive Income Three and Six Months Ended November  30, 2014 and 2013			6
Condensed Consolidated Statements of Cash Flows Six Months Ended November 30, 2014 and 2013			7
Notes to Condensed Consolidated Financial Statements			8
Report of Independent Registered Public Accounting Firm			14
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition			15
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk			23
ITEM 4. Controls and Procedures			23
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings			23
ITEM 1A. Risk Factors			23
ITEM 6. Exhibits			23
Signature			25
Exhibit Index			E-1
Exhibit 12.1
Exhibit 15.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

 

-2-

---

Table of Contents

FEDERAL EXPRESS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS)

 

		November 30,
		2014				May 31,
		(Unaudited)				2014
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	848			$	858
Receivables, less allowances of $87 and $80			1,763				1,705
Spare parts, supplies and fuel, less allowances of $214 and $211			403				395
Deferred income taxes			380				401
Due from parent company and other FedEx subsidiaries			523				502
Prepaid expenses and other			93				103
Total current assets			4,010				3,964
PROPERTY AND EQUIPMENT, AT COST			26,182				25,752
Less accumulated depreciation and amortization			12,593				12,272
Net property and equipment			13,589				13,480
OTHER LONG-TERM ASSETS
Goodwill			1,506				1,561
Other assets			1,029				959
Total other long-term assets			2,535				2,520
		$	20,134			$	19,964

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

 

-3-

---

Table of Contents

FEDERAL EXPRESS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS, EXCEPT SHARE DATA)

 

		November 30,
		2014				May 31,
		(Unaudited)				2014
LIABILITIES AND OWNER’S EQUITY
CURRENT LIABILITIES
Accrued salaries and employee benefits		$	924			$	902
Accounts payable			1,315				1,394
Accrued expenses			1,018				1,019
Due to other FedEx subsidiaries			740				910
Total current liabilities			3,997				4,225
LONG-TERM DEBT, LESS CURRENT PORTION			239				239
OTHER LONG-TERM LIABILITIES
Deferred income taxes			3,192				3,196
Pension, postretirement healthcare and other benefit obligations			1,205				1,208
Self-insurance accruals			683				667
Deferred lease obligations			713				643
Deferred gains, principally related to aircraft transactions			190				203
Other liabilities			105				96
Total other long-term liabilities			6,088				6,013
COMMITMENTS AND CONTINGENCIES
OWNER’S EQUITY
Common stock, $0.10 par value; 1,000 shares authorized, issued and outstanding			—				—
Additional paid-in capital			608				608
Retained earnings			9,413				8,944
Accumulated other comprehensive loss			(211	)			(65	)
Total owner’s equity			9,810				9,487
		$	20,134			$	19,964

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

 

-4-

---

Table of Contents

FEDERAL EXPRESS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(IN MILLIONS)

 

		Three Months Ended								Six Months Ended
		November 30,								November 30,
		2014				2013				2014				2013
REVENUES		$	6,715			$	6,546			$	13,299			$	12,892
OPERATING EXPENSES:
Salaries and employee benefits			2,446				2,387				4,847				4,747
Purchased transportation			465				446				922				876
Rentals and landing fees			416				413				835				827
Depreciation and amortization			365				370				736				736
Fuel			906				986				1,876				1,942
Maintenance and repairs			356				307				733				613
Intercompany charges, net			476				505				952				994
Other			843				810				1,629				1,605
			6,273				6,224				12,530				12,340
OPERATING INCOME			442				322				769				552
OTHER INCOME (EXPENSE):
Interest, net			5				5				8				12
Other, net			(25	)			(22	)			(57	)			(43	)
			(20	)			(17	)			(49	)			(31	)
INCOME BEFORE INCOME TAXES			422				305				720				521
PROVISION FOR INCOME TAXES			148				107				251				177
NET INCOME		$	274			$	198			$	469			$	344

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

 

-5-

---

Table of Contents

FEDERAL EXPRESS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(IN MILLIONS)

 

		Three Months Ended								Six Months Ended
		November 30,								November 30,
		2014				2013				2014				2013
NET INCOME		$	274			$	198			$	469			$	344
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustments, net of tax of $11, $5, $19 and $4			(119	)			44				(148	)			(34	)
Amortization of unrealized pension actuarial gains/losses and other, net of tax of $0, $0, $1 and $1			1				2				2				3
			(118	)			46				(146	)			(31	)
COMPREHENSIVE INCOME		$	156			$	244			$	323			$	313

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

 

-6-

---

Table of Contents

FEDERAL EXPRESS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(IN MILLIONS)

 

		Six Months Ended
		November 30,
		2014				2013
Operating Activities:
Net income		$	469			$	344
Noncash charges:
Depreciation and amortization			736				736
Other, net			63				108
Changes in assets and liabilities, net			(149	)			(76	)
Cash provided by operating activities			1,119				1,112
Investing Activities:
Capital expenditures			(1,079	)			(992	)
Other			4				14
Cash used in investing activities			(1,075	)			(978	)
Financing Activities:
Principal payments on debt			—				(3	)
Cash used in financing activities			—				(3	)
Effect of exchange rate changes on cash			(54	)			(2	)
Net (decrease) increase in cash and cash equivalents			(10	)			129
Cash and cash equivalents at beginning of period			858				769
Cash and cash equivalents at end of period		$	848			$	898

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

 

-7-

---

Table of Contents

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 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, 2014 (“Annual Report”). Accordingly, significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed in our Annual Report.

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 November 30, 2014, the results of our operations for the three- and six-month periods ended November 30, 2014 and 2013 and cash flows for the six-month periods ended November 30, 2014 and 2013. Operating results for the three- and six-month periods ended November 30, 2014 are not necessarily indicative of the results that may be expected for the year ending May 31, 2015.

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, 2015 or ended May 31 of the year referenced and comparisons are to the corresponding period of the prior year.

EMPLOYEES UNDER COLLECTIVE BARGAINING ARRANGEMENTS. Our pilots, which represent a small number of our total employees, are employed under a collective bargaining agreement. The contract became amendable in March 2013, and the parties are currently in negotiations. In October 2014, we formally requested assistance from the National Mediation Board (“NMB”) to mediate the negotiations. The NMB is the U.S. governmental agency that oversees labor agreements for entities covered by the Railway Labor Act of 1926, as amended (“Railway Labor Act”). The progression of negotiations into the mediation stage has no impact on our operations or our ability to provide highly reliable service to customers. In addition to our pilots, certain non-U.S. employees are unionized.

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.

Our stock-based compensation expense was $10 million for the three-month period ended November 30, 2014 and $26 million for the six-month period ended November 30, 2014. Our stock-based compensation expense was $9 million for the three-month period ended November 30, 2013 and $24 million for the six-month period ended November 30, 2013. 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 a carrying value of $239 million at November 30, 2014 and May 31, 2014 compared with an estimated fair value of $335 million at November 30, 2014 and $326 million at May 31, 2014. The estimated fair values were determined based on quoted market prices and the current rates offered for debt with similar terms and maturities. The fair value of our long-term debt is classified as Level 2 within the fair value hierarchy. This classification is defined as a fair value determined using market-based inputs other than quoted prices that are observable for the liability, either directly or indirectly.

 

-8-

---

Table of Contents

RECENT ACCOUNTING GUIDANCE. New accounting rules and disclosure requirements can significantly impact our reported results and the comparability of our financial statements.

We believe that no other new accounting guidance was adopted or issued during the first six months of 2015 that is relevant to the readers of our financial statements. However, there are numerous new proposals under development which, if and when enacted, may have a significant impact on our financial reporting, as described in our Annual Report.

(2) Accumulated Other Comprehensive Income

The following table provides changes in accumulated other comprehensive income (“AOCI”), net of tax, reported in our condensed consolidated financial statements for the three-month and six-month periods ended November 30 (in millions; amounts in parentheses indicate debits to AOCI):

 

		Three Months Ended								Six Months Ended
		2014				2013				2014				2013
Foreign currency translation gain (loss):
Balance at beginning of period		$	38			$	12			$	67			$	90
Translation adjustments			(119	)			44				(148	)			(34	)
Balance at end of period			(81	)			56				(81	)			56
Retirement plans adjustments:
Balance at beginning of period			(131	)			(125	)			(132	)			(126	)
Reclassifications from AOCI			1				2				2				3
Balance at end of period			(130	)			(123	)			(130	)			(123	)
Accumulated other comprehensive loss at end of period		$	(211	)		$	(67	)		$	(211	)		$	(67	)

Due to its immateriality, the table presenting details of reclassifications from AOCI has been excluded from this quarterly report.

(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. Defined contribution plans are in place covering a majority of U.S. employees and certain international employees. 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 November 30, 2014 and in our Annual Report.

 

-9-

---

Table of Contents

Our retirement plans costs for the periods ended November 30 were as follows (in millions):

 

		Three Months Ended								Six Months Ended
		2014				2013				2014				2013
Pension plans sponsored by FedEx		$	24			$	67			$	48			$	134
Other U.S. domestic and international pension plans			14				14				28				27
U.S. domestic and international defined contribution plans			60				57				121				115
U.S. domestic and international postretirement healthcare plans			15				16				31				31
		$	113			$	154			$	228			$	307

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 half of 2015 or 2014 to pension plans sponsored by us, and we do not expect to make material contributions in 2015.

(4) Commitments

As of November 30, 2014, our purchase commitments under various contracts for the remainder of 2015 and annually thereafter were as follows (in millions):

 

		Aircraft and   Aircraft-Related				Other(1)				Total
2015 (remainder)		$	709			$	48			$	757
2016			1,230				41				1,271
2017			1,033				32				1,065
2018			1,402				26				1,428
2019			1,022				10				1,032
Thereafter			4,472				80				4,552
Total		$	9,868			$	237			$	10,105

 

(1)	Primarily advertising and promotions contracts.

The amounts reflected in the table above for purchase commitments represent noncancelable agreements to purchase goods or services. As of November 30, 2014, our obligation to purchase four Boeing 767-300 Freighter (“B767F”) aircraft and nine Boeing 777 Freighter (“B777F”) aircraft is conditioned upon there being no event that causes us or our employees not to be covered by the Railway Labor Act. 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.

During September 2014, FedEx Express entered into an agreement to purchase four additional B767F aircraft, the delivery of which will begin in 2017 and continue through 2019.

We had $500 million in deposits and progress payments as of November 30, 2014 on aircraft purchases and other planned aircraft-related transactions. These deposits are classified in the “Other assets” caption of our consolidated balance sheets. In addition to our commitment to purchase B777Fs and B767Fs, our aircraft purchase commitments include the Boeing 757 (“B757”) aircraft in passenger configuration, which will require additional costs to modify for cargo transport. Aircraft and aircraft-related contracts are

 

-10-

---

Table of Contents

subject to price escalations. The following table is a summary of the key aircraft we are committed to purchase as of November 30, 2014 with the year of expected delivery:

 

		B757				B767F				B777F				Total
2015 (remainder)			1				8				—				9
2016			—				11				2				13
2017			—				12				—				12
2018			—				11				2				13
2019			—				6				2				8
Thereafter			—				—				12				12
Total			1				48				18				67

A summary of future minimum lease payments under noncancelable operating leases with an initial or remaining term in excess of one year at November 30, 2014 is as follows (in millions):

 

		Operating Leases
		Aircraft   and Related   Equipment				Facilities   and Other				Total   Operating   Leases
2015 (remainder)		$	391			$	362			$	753
2016			461				654				1,115
2017			399				827				1,226
2018			329				513				842
2019			273				442				715
Thereafter			551				3,640				4,191
Total		$	2,404			$	6,438			$	8,842

Future minimum lease payments under capital leases were immaterial at November 30, 2014. 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

Environmental Matters. SEC regulations require disclosure of certain environmental matters when a governmental authority is a party to the proceedings and the proceedings involve potential monetary sanctions that management reasonably believes could exceed $100,000.

On January 14, 2014, the U.S. Department of Justice (“DOJ”) issued a Grand Jury Subpoena to FedEx Express relating to an asbestos matter previously investigated by the U.S. Environmental Protection Agency. On May 1, 2014, the DOJ informed us that it had determined to continue to pursue the matter as a criminal case, citing seven asbestos-related regulatory violations associated with removal of roof materials from a hangar in Puerto Rico during cleaning and repair activity, as well as violation of waste disposal requirements. Loss is reasonably possible; however, the amount of any loss is expected to be immaterial.

Department of Justice Indictment – Internet Pharmacy Shipments. In the past, we received requests for information from the DOJ in the Northern District of California in connection with a criminal investigation relating to the transportation of packages for online pharmacies that may have shipped pharmaceuticals in violation of federal law. In July 2014, the DOJ filed a criminal indictment in the United States District Court for the Northern District of California in connection with the matter. A superseding indictment was filed in August 2014. The indictment alleges that FedEx Corporation, FedEx Express and FedEx Services, together with certain

 

-11-

---

Table of Contents

pharmacies, conspired to unlawfully distribute controlled substances, unlawfully distributed controlled substances and conspired to unlawfully distribute misbranded drugs. The superseding indictment adds conspiracy to launder money counts related to services provided to and payments from online pharmacies. We continue to believe that our employees have acted in good faith at all times and that we have not engaged in any illegal activities.

Accordingly, we will vigorously defend ourselves in this matter. If we are convicted, remedies could include fines, penalties, forfeiture and compliance conditions. Given the early stage of this proceeding, we cannot estimate the amount or range of loss, if any; however, it is reasonably possible that it could be material if we are convicted.

Other Matters. In August 2010, a third-party consultant who works with shipping customers to negotiate lower rates filed a lawsuit in federal district court in California against FedEx and United Parcel Service, Inc. (“UPS”) alleging violations of U.S. antitrust law. This matter was dismissed in May 2011, but the court granted the plaintiff permission to file an amended complaint, which FedEx received in June 2011. In November 2011, the court granted our motion to dismiss this complaint, but again allowed the plaintiff to file an amended complaint. The plaintiff filed a new complaint in December 2011, and the matter remains pending before the court. In February 2011, shortly after the initial lawsuit was filed, we received a demand for the production of information and documents in connection with a civil investigation by the DOJ into the policies and practices of FedEx and UPS for dealing with third-party consultants who work with shipping customers to negotiate lower rates. In November 2012, the DOJ served a civil investigative demand on the third-party consultant seeking all pleadings, depositions and documents produced in the lawsuit. We are cooperating with the investigation, do not believe that we have engaged in any anti-competitive activities and will vigorously defend ourselves in any action that may result from the investigation. While the litigation proceedings and the DOJ investigation move forward, and the amount of loss, if any, is dependent on a number of factors that are not yet fully developed or resolved, the amount of any loss is expected to be immaterial.

On June 30, 2014, we received a Statement of Objections from the French Competition Authority (“FCA”) addressed to FedEx Express France, formerly known as TATEX, regarding an investigation by the FCA into anticompetitive behavior that is alleged to have occurred primarily in the framework of trade association meetings that included the former general managers of TATEX prior to our acquisition of that company in July 2012. In September 2014, FedEx Express France submitted its observations in response to the Statement of Objections to the FCA. Given the early stage of this matter, we cannot yet determine the amount or range of potential loss; however, it is reasonably possible that it could be material.

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 TechConnect, Inc. (“FedEx TechConnect”), a wholly owned subsidiary of FedEx Corporate Services, Inc. (“FedEx Services”). FedEx Services is a wholly owned subsidiary of FedEx. Under this arrangement, we recognize revenue for the transportation services provided to our U.S. customers and factor the related receivables to FedEx TechConnect for collection. We have no continuing involvement with the receivables transferred to FedEx TechConnect. Our net receivables recorded by FedEx TechConnect totaled $1.7 billion at November 30, 2014 and May 31, 2014.

 

-12-

---

Table of Contents

The costs of FedEx Services, FedEx TechConnect and FedEx Office and Print Services, Inc., as well as charges for management fees from our parent, are allocated to us and are included in the expense line item “Intercompany charges, net” based on metrics such as relative revenues or estimated services provided. We believe these allocations approximate the net cost of providing the functions. FedEx allocation methodologies are refined as necessary to reflect changes in our business.

(7) Supplemental Cash Flow Information

Cash paid for interest expense and income taxes for the six-month periods ended November 30 was as follows (in millions):

 

		2014				2013
Cash payments for:
Income taxes		$	295			$	127
Income tax refunds received			(3	)			(43	)
Cash tax payments, net		$	292			$	84

 

-13-

---

Table of Contents

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 November 30, 2014, and the related condensed consolidated statements of income and comprehensive income for the three-month and six-month periods ended November 30, 2014 and 2013 and the condensed consolidated statements of cash flows for the six-month periods ended November 30, 2014 and 2013. 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, 2014, and the related consolidated statements of income, comprehensive income, changes in owner’s equity and cash flows for the year then ended not presented herein, and in our report dated July 14, 2014, 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, 2014, 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

December 18, 2014

 

-14-

---

Table of Contents

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 (“MD&A”), 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, 2014 (“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 November 30, 2014.

We are the world’s largest express transportation company. Our sister company FedEx Corporate Services, Inc. (“FedEx Services”) provides us and our other sister companies, including FedEx Ground Package System, Inc. (“FedEx Ground”), with sales, marketing, information technology, communications and certain back-office support, as well as retail access for our customers through FedEx Office and Print Services, Inc. (“FedEx Office”) and customer service, technical support and billing and collection services through FedEx TechConnect, Inc.

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. For the international regions of FedEx Express, similar functions are performed on a regional basis by FedEx Express and reported in expense line items outside of intercompany charges. “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 approximate the net cost of providing these functions. FedEx allocation methodologies are refined as necessary to reflect changes in our business.

The key indicators necessary to understand our operating results include:

 

•

the overall customer demand for our various services based on macro-economic factors and the global economy;

 

•

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 yield (revenue per package or pound);

 

•

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 offset these fluctuations 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 volumes. Therefore, the discussion of operating expense captions focuses on the key drivers and trends impacting expenses other than changes in revenues and volume. The line item “Other operating expenses” predominantly includes costs associated with outside service contracts (such as security, facility services and cargo handling), professional fees, uniforms, utilities and insurance.

 

-15-

---

Table of Contents

Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2015 or ended May 31 of the year referenced and comparisons are to the corresponding period of the prior year.

 

-16-

---

Table of Contents

RESULTS OF OPERATIONS

We offer a wide range of U.S. domestic and international shipping services for delivery of packages and freight including priority services, which provide time-definite delivery within one, two or three business days worldwide, and deferred or economy services, which provide time-definite delivery within five business days worldwide. The following tables compare revenues, operating expenses, operating expenses as a percent of revenue, operating income, net income and operating margin (dollars in millions) for the periods ended November 30:

 

		Three Months Ended								Percent				Six Months Ended								Percent
		2014				2013				Change				2014				2013				Change
Revenues:
Package:
U.S. overnight box		$	1,705			$	1,625				5			$	3,387			$	3,209				6
U.S. overnight envelope			400				398				1				815				817				—
U.S. deferred			834				771				8				1,629				1,500				9
Total U.S. domestic package revenue			2,939				2,794				5				5,831				5,526				6
International priority			1,649				1,642				—				3,279				3,218				2
International economy			598				567				5				1,169				1,099				6
Total international export package revenue			2,247				2,209				2				4,448				4,317				3
International domestic(1)			383				385				(1	)			754				730				3
Total package revenue			5,569				5,388				3				11,033				10,573				4
Freight:
U.S.			586				585				—				1,165				1,209				(4	)
International priority			412				417				(1	)			807				805				—
International airfreight			42				55				(24	)			88				109				(19	)
Total freight revenue			1,040				1,057				(2	)			2,060				2,123				(3	)
Other			106				101				5				206				196				5
Total revenues			6,715				6,546				3				13,299				12,892				3
Operating expenses:
Salaries and employee benefits			2,446				2,387				2				4,847				4,747				2
Purchased transportation			465				446				4				922				876				5
Rentals and landing fees			416				413				1				835				827				1
Depreciation and amortization			365				370				(1	)			736				736				—
Fuel			906				986				(8	)			1,876				1,942				(3	)
Maintenance and repairs			356				307				16				733				613				20
Intercompany charges			476				505				(6	)			952				994				(4	)
Other			843				810				4				1,629				1,605				1
Total operating expenses			6,273				6,224				1				12,530				12,340				2
Operating income		$	442			$	322				37			$	769			$	552				39
Operating margin			6.6	%			4.9	%			170	bp			5.8	%			4.3	%			150	bp
Other income (expense):
Interest, net			5				5				—				8				12				(33	)
Other, net			(25	)			(22	)			14				(57	)			(43	)			33
			(20	)			(17	)			18				(49	)			(31	)			58
Income before income taxes			422				305				38				720				521				38
Provision for income taxes			148				107				38				251				177				42
Net income		$	274			$	198				38			$	469			$	344				36

 

(1)	International domestic revenues represent our international intra-country express operations.

 

-17-

---

Table of Contents

		Percent of Revenue
		Three Months Ended								Six Months Ended
		2014				2013				2014				2013
Operating expenses:
Salaries and employee benefits			36.4	%			36.5	%			36.4	%			36.8	%
Purchased transportation			6.9				6.8				6.9				6.8
Rentals and landing fees			6.2				6.3				6.3				6.4
Depreciation and amortization			5.4				5.6				5.5				5.7
Fuel			13.5				15.1				14.1				15.1
Maintenance and repairs			5.3				4.7				5.5				4.8
Intercompany charges			7.1				7.7				7.2				7.7
Other			12.6				12.4				12.3				12.4
Total operating expenses			93.4				95.1				94.2				95.7
Operating margin			6.6	%			4.9	%			5.8	%			4.3	%

The following table compares selected statistics (in thousands, except yield amounts) for the periods ended November 30:

 

		Three Months Ended								Percent				Six Months Ended								Percent
		2014				2013				Change				2014				2013				Change
Package Statistics
Average daily package volume (ADV):
U.S. overnight box			1,259				1,146				10				1,235				1,129				9
U.S. overnight envelope			521				535				(3	)			524				549				(5	)
U.S. deferred			915				841				9				880				815				8
Total U.S. domestic ADV			2,695				2,522				7				2,639				2,493				6
International priority			424				421				1				417				414				1
International economy			180				172				5				175				168				4
Total international export ADV			604				593				2				592				582				2
International domestic(1)			917				896				2				866				842				3
Total ADV			4,216				4,011				5				4,097				3,917				5
Revenue per package (yield):
U.S. overnight box		$	21.50			$	22.50				(4	)		$	21.59			$	22.39				(4	)
U.S. overnight envelope			12.15				11.84				3				12.24				11.72				4
U.S. deferred			14.48				14.55				—				14.58				14.49				1
U.S. domestic composite			17.31				17.59				(2	)			17.40				17.45				—
International priority			61.64				61.87				—				61.92				61.27				1
International economy			52.88				52.27				1				52.75				51.35				3
International export composite			59.04				59.08				—				59.21				58.40				1
International domestic(1)			6.63				6.82				(3	)			6.85				6.83				—
Composite package yield			20.97				21.32				(2	)			21.21				21.25				—
Freight Statistics
Average daily freight pounds:
U.S.			8,039				7,872				2				7,676				7,646				—
International priority			2,983				3,068				(3	)			2,887				2,964				(3	)
International airfreight			630				907				(31	)			650				878				(26	)
Total average daily freight pounds			11,652				11,847				(2	)			11,213				11,488				(2	)
Revenue per pound (yield):
U.S.		$	1.16			$	1.18				(2	)		$	1.20			$	1.25				(4	)
International priority			2.19				2.16				1				2.20				2.14				3
International airfreight			1.07				0.97				10				1.07				0.98				9
Composite freight yield			1.42				1.42				—				1.45				1.46				(1	)

 

(1)	International domestic statistics represent our international intra-country express operations.

 

-18-

---

Table of Contents

Revenues

Our revenues increased 3% in the second quarter and first half of 2015 primarily due to higher U.S. domestic package volumes and international export package base revenues. These factors were partially offset by lower fuel surcharges and unfavorable exchange rates.

U.S. domestic volumes increased 7% in the second quarter and 6% in the first half of 2015 driven by both our overnight and deferred service offerings. International export yields increased in the first half of 2015, due to higher rates and weight per package, partially offset by unfavorable exchange rates. U.S. domestic and international export revenues were partially offset by lower fuel surcharges. International export volumes increased 2% in the second quarter and first half of 2015 driven by our international economy service offering.

Operating Income

Our operating income and operating margin increased in the second quarter and first half of 2015, driven by the revenue growth in our U.S. and international export package business, cost management related to profit improvement programs, lower pension expense and the positive net impact of fuel. These factors were partially offset by higher maintenance expense.

Maintenance and repairs expense increased 16% in the second quarter and 20% in first half of 2015 due to the timing of aircraft maintenance events. Salaries and employee benefits increased 2% in the second quarter and first half of 2015 due to additional staffing to support volume growth, partially offset by the benefits from our voluntary employee severance program and lower pension expense. Purchased transportation costs increased 4% in the second quarter and 5% in the first half of 2015 due to higher utilization of third-party transportation providers and costs associated with the growth of our freight-forwarding business at FedEx Trade Networks.

Fuel

Fuel expense decreased 8% in the second quarter and 3% in the first half of 2015 due to lower aircraft fuel prices. However, fuel prices represent only one component of the two factors we consider meaningful in understanding the impact of fuel on our business. Consideration must also be given to the fuel surcharge revenue we collect. Accordingly, we believe discussion of the net impact of fuel on our results, which is a comparison of the year-over-year change in these two factors, is important to understand the impact of fuel on our business. In order to provide information about the impact of fuel surcharges on the trend in revenue and yield growth, we have included the comparative weighted-average fuel surcharge percentages in effect for the second quarter and first half of 2015 and 2014 below.

The index used to determine our fuel surcharges incorporates a timing lag of approximately six to eight weeks before they are adjusted for changes in fuel prices. For example, the fuel surcharge index in effect in November 2014 was set based on September 2014 fuel prices. In addition, the structure of the table that is used to determine our fuel surcharge does not adjust immediately for changes in fuel price, but allows for the fuel surcharge revenue charged to our customers to remain unchanged as long as fuel prices remain within certain ranges.

Beyond these factors, the manner in which we purchase fuel also influences the net impact of fuel on our results. For example, our contracts for jet fuel purchases are tied to various indices, including the U.S. Gulf Coast index. While many of these indices are aligned, each index may fluctuate at a different pace, driving variability in the prices paid for jet fuel. Furthermore, under these contractual arrangements, approximately 75% of our jet fuel is purchased based on the index price for the preceding week, with the remainder of our purchases tied to the index price for the preceding month, rather than based on daily spot rates. These contractual provisions mitigate the impact of rapidly changing daily spot rates on our jet fuel purchases.

Because of the factors described above, our operating results may be affected should the market price of fuel suddenly change by a significant amount or change by amounts that do not result in an adjustment in our fuel surcharges, which can significantly affect our earnings either positively or negatively in the short-term.

 

-19-

---

Table of Contents

We routinely review our fuel surcharges and our fuel surcharge methodology. Effective February 2, 2015, we will update the tables used to determine our fuel surcharges.

The net impact of fuel had a slight benefit in the second quarter and a modest benefit in the first half of 2015 to operating income. This was driven by decreased fuel prices during the second quarter and first half of 2015 versus prior year, which was partially offset by the year-over-year decrease in fuel surcharge revenue during these periods.

The net impact of fuel on our operating results does not consider the effects that fuel surcharge levels may have on our business, including changes in demand and shifts in the mix of services purchased by our customers. While fluctuations in fuel surcharge percentages can be significant from period to period, fuel surcharges represent one of the many individual components of our pricing structure that impact our overall revenue and yield. Additional components include the mix of services sold, the base price and extra service charges we obtain for these services and the level of pricing discounts offered. Our U.S. domestic and outbound fuel surcharge and the international fuel surcharges ranged as follows for the periods ended November 30:

 

		Three Months Ended								Six Months Ended
		2014				2013				2014				2013
U.S. Domestic and Outbound Fuel Surcharge:
Low			8.00	%			9.50	%			8.00	%			8.00	%
High			9.00				10.50				9.50				10.50
Weighted-average			8.69				10.02				9.09				9.26
International Fuel Surcharges:
Low			12.00				13.50				12.00				12.00
High			17.50				19.00				18.00				19.00
Weighted-average			15.59				16.79				15.92				16.09

On September 16, 2014, we announced a 4.9% average list price increase for our U.S. domestic, U.S. export and U.S. import services effective January 5, 2015. In January 2014, we implemented a 3.9% average list price increase for our U.S. domestic, U.S. export and U.S. import services.

Income Taxes

Our effective tax rate was 35.3% for the second quarter of 2015 and 34.9% for the first half of 2015, compared with 35.0% in the second quarter and 33.9% in the first half of 2014. Our effective tax rates in 2014 were positively impacted by a discrete tax benefit related to the expiration of applicable statute of limitations. For 2015, we expect an effective tax rate between 34.0% and 35.0%. The actual rate, however, will depend on a number of factors, including the amount and source of operating income.

We are subject to taxation in the United States and various U.S. state, local and foreign jurisdictions. Substantially all U.S. federal income tax matters through fiscal year 2011 are concluded, and we are currently under examination by the Internal Revenue Service for the 2012 and 2013 tax years. It is reasonably possible that certain income tax return proceedings will be completed during the next twelve months and could result in a change in our balance of unrecognized tax benefits. The expected impact of any changes would not be material to our consolidated financial statements. As of November 30, 2014, there were no material changes to our liabilities for unrecognized tax benefits from May 31, 2014.

RECENT ACCOUNTING GUIDANCE

New accounting rules and disclosure requirements can significantly impact our reported results and the comparability of our financial statements.

 

-20-

---

Table of Contents

We believe that no other new accounting guidance was adopted or issued during the first six months of 2015 that is relevant to the readers of our financial statements. However, there are numerous new proposals under development which, if and when enacted, may have a significant impact on our financial reporting, as described in our Annual Report.

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;

 

•

significant changes in the volumes of shipments transported through our networks, customer demand for our various services or the prices we obtain 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 our operations and reputation among customers;

 

•

the price and availability of jet and vehicle fuel;

 

•

our ability to manage our cost structure for capital expenditures and operating expenses, and match it to shifting and future customer volume levels;

 

•

the impact of intense competition on our ability to maintain or increase our prices (including our fuel surcharges in response to fluctuating fuel price) or to maintain or grow our market share;

 

•

our ability to effectively operate, integrate, leverage and grow acquired businesses, and to continue to support the value we allocate to these acquired businesses, including their goodwill;

 

•

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;

 

•

our ability to execute on our profit improvement programs;

 

•

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;

 

•

any impacts on our businesses resulting from new domestic or international government laws and regulation, including regulatory actions affecting global aviation or other transportation rights, increased air cargo and other security or safety requirements, and tax, accounting, trade (such as protectionist measures enacted in response to weak economic conditions), labor (such as card-check legislation or changes to the Railway Labor Act affecting our employees), environmental (such as global climate change legislation) or postal rules;

 

-21-

---

Table of Contents

•

adverse weather conditions or localized natural disasters in key geographic areas, such as earthquakes, volcanoes, and hurricanes, which can disrupt our electrical service, damage our property, disrupt our operations, increase our fuel costs and adversely affect our shipment levels;

 

•

any impact on our business from disruptions or modifications in service by the United States Postal Service (“USPS”), which is a significant customer of ours, as a consequence of the USPS’s current financial difficulties or any resulting structural changes to its operations, network, service offerings or pricing;

 

•

increasing costs, the volatility of costs and funding requirements and other legal mandates for employee benefits, especially pension and healthcare benefits;

 

•

the increasing costs of compliance with federal and state governmental agency mandates, including those related to healthcare benefits, and defending against inappropriate or unjustified enforcement of other actions by such agencies;

 

•

changes in foreign currency exchange rates, especially in the Chinese yuan, euro, Brazilian real, Canadian dollar and the British pound, which can affect our sales levels and foreign currency sales prices;

 

•

market acceptance of our new service and growth initiatives;

 

•

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 or governmental proceedings;

 

•

the outcome of future negotiations to reach new collective bargaining agreements — including with the union that represents our pilots (the current pilot contract became amendable in March 2013, and the parties are currently in negotiations);

 

•

the impact of technology developments on our operations and on demand for our services, and our ability to continue to identify and eliminate unnecessary information technology redundancy and complexity throughout the organization;

 

•

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

 

•

other risks and uncertainties you can find in FedEx’s 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.

 

-22-

---

Table of Contents

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 November 30, 2014 (the end of the period covered by this Quarterly Report on Form 10-Q).

During our fiscal quarter ended November 30, 2014, 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.

PART II. OTHER INFORMATION

 

Item 1.

Legal Proceedings

For a description of all material pending legal proceedings, see Note 5 of the accompanying unaudited 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		Supplemental Agreement No. 5 (and related side letters) dated as September 29, 2014, amending the Boeing 767-3S2 Freighter Purchase Agreement dated as of December 14, 2011 between The Boeing Company and Federal Express Corporation. Confidential treatment has been requested for confidential and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.2 to FedEx Corporation’s FY15 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.2		Amendment dated September 9, 2014 (but effective as of June 27, 2014), amending the Transportation Agreement dated April 23, 2013 between the United States Postal Service and Federal Express Corporation (the “Transportation Agreement”). 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 FY15 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.3		Amendment dated September 9, 2014 (but effective as of September 30, 2013), amending the Transportation Agreement. 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 FY15 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.4		Amendment dated September 9, 2014 (but effective as of June 27, 2014), amending the Transportation Agreement. 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 10.5 to FedEx Corporation’s FY15 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.5		Amendment dated September 24, 2014 (but effective as of June 30, 2014), amending the Transportation Agreement. 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 10.6 to FedEx Corporation’s FY15 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.6		Amendment dated September 30, 2014 (but effective as of July 28, 2014), amending the Transportation Agreement. 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 10.7 to FedEx Corporation’s FY15 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)

 

-23-

---

Table of Contents

10.7		Amendment dated October 1, 2014 (but effective as of September 1, 2014), amending the Transportation Agreement. 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 10.8 to FedEx Corporation’s FY15 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.8		Amendment dated September 30, 2014 (but effective as of September 29, 2014), amending the Transportation Agreement. 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 10.9 to FedEx Corporation’s FY15 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.9		Amendment dated November 4, 2014 (but effective as of September 29, 2014), amending the Transportation Agreement. 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 10.10 to FedEx Corporation’s FY15 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.10		Amendment dated November 4, 2014 (but effective as of December 1, 2013), amending the Transportation Agreement. 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 10.11 to FedEx Corporation’s FY15 Second 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.
101.1		Interactive Data Files.

 

-24-

---

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

						FEDERAL EXPRESS CORPORATION
Date: December 18, 2014								/s/ ELISE L. JORDAN
								ELISE L. JORDAN
								SENIOR VICE PRESIDENT AND
								CHIEF FINANCIAL OFFICER

 

-25-

---

Table of Contents

EXHIBIT INDEX

 

Exhibit   Number		Description of Exhibit
10.1		Supplemental Agreement No. 5 (and related side letters) dated as September 29, 2014, amending the Boeing 767-3S2 Freighter Purchase Agreement dated as of December 14, 2011 between The Boeing Company and Federal Express Corporation. Confidential treatment has been requested for confidential and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.2 to FedEx Corporation’s FY15 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.2		Amendment dated September 9, 2014 (but effective as of June 27, 2014), amending the Transportation Agreement dated April 23, 2013 between the United States Postal Service and Federal Express Corporation (the “Transportation Agreement”). 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 FY15 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.3		Amendment dated September 9, 2014 (but effective as of September 30, 2013), amending the Transportation Agreement. 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 FY15 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.4		Amendment dated September 9, 2014 (but effective as of June 27, 2014), amending the Transportation Agreement. 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 10.5 to FedEx Corporation’s FY15 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.5		Amendment dated September 24, 2014 (but effective as of June 30, 2014), amending the Transportation Agreement. 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 10.6 to FedEx Corporation’s FY15 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.6		Amendment dated September 30, 2014 (but effective as of July 28, 2014), amending the Transportation Agreement. 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 10.7 to FedEx Corporation’s FY15 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.7		Amendment dated October 1, 2014 (but effective as of September 1, 2014), amending the Transportation Agreement. 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 10.8 to FedEx Corporation’s FY15 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.8		Amendment dated September 30, 2014 (but effective as of September 29, 2014), amending the Transportation Agreement. 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 10.9 to FedEx Corporation’s FY15 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.9		Amendment dated November 4, 2014 (but effective as of September 29, 2014), amending the Transportation Agreement. 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 10.10 to FedEx Corporation’s FY15 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.10		Amendment dated November 4, 2014 (but effective as of December 1, 2013), amending the Transportation Agreement. 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 10.11 to FedEx Corporation’s FY15 Second 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.

 

E-1

---

Table of Contents

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.
101.1		Interactive Data Files.

 

E-2