Federal Express 1998 Annual Report Download - page 30

P28 FDX CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
for 1997 was $371 million, or $2.52 per share,
assuming dilution.
In addition, Caliber recorded in 1998 approximately
$5 million of income, net of tax, from discontinued oper-
ations related to the exiting of the airfreight business
served by Roadway Global Air, Inc. in 1995.
A significant non-recurring item impacting 1998’s
results of operations was the Teamsters strike against
United Parcel Service (“UPS”) in August 1997. During
the 12 operating days of the strike, FedEx delivered
approximately 800,000 additional U.S. domestic
express packages per day, and RPS delivered approxi-
mately 300,000 additional packages per day. While it is
difficult to estimate with precision the impact of this
additional volume, FedEx and RPS have retained a por-
tion of this volume. The Company analytically calculated
that the volume not retained at the end of the first quar-
ter contributed approximately $170 million in revenues
to that quarter. This additional revenue, net of applicable
variable compensation, income taxes and variable
costs, but not allocated fixed costs, resulted in approxi-
mately $.25 additional earnings per share, assuming
dilution, to the consolidated first quarter’s earnings.
FedEx recorded two aircraft-related items in the current
year. FedEx realized a net gain of $17 million from the
insurance settlement and the release from certain
related liabilities on a leased MD11 aircraft destroyed in
an accident in July 1997. This gain was recorded in
operating and non-operating income in substantially
equal amounts. An unrelated expense, which partially
offset this gain, was an addition of $9 million to an oper-
ating reserve for the disposition of leased B747 air-
craft. In recording the additional reserve, maintenance
and repairs and rentals and landing fees expenses were
increased. These aircraft, which were subleased,
underwent certain maintenance and repairs before
being transferred to a new lessee. The net effect of the
MD11 gain and the B747 reserve on FedEx’s domestic
and international operating income was immaterial. The
combined effect of these aircraft-related items con-
tributed approximately $.03 per share in the first quar-
ter of 1998, net of applicable variable compensation
and income taxes.
FedEx’s 1997 results included a $15 million pre-
tax benefit to operating income from the settlement
of a Tennessee personal property tax matter and a
$17 million gain in non-operating income from an insur-
ance settlement for a DC10 destroyed by fire in Sep-
tember 1996.
In 1998, FedEx’s U.S. domestic package volumes
increased on a year-over-year basis primarily due to
Revenues
The following table shows a comparison of revenues for the years ended May 31:
In millions Percent Change
1998 1997 1996 1998/1997 1997/1996
FedEx:
U.S. domestic express $ 9,326 $ 8,073 $ 7,284 +16 +11
International Priority (IP) 2,731 2,351 1,997 +16 +18
International Express Freight (IXF)
and Airport-to-Airport (ATA) 598 605 554 – 1 + 9
FedEx Air Charter 88 72 92 +21 –22
Logistics services 99 99 94 — + 5
Other(1) 413 320 253 +29 +27
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13,255 11,520 10,274 +15 +12
Caliber:
RPS 1,710 1,344 1,293 +27 + 4
Viking 382 966 834 –60 +16
Other 526 408 321 +29 +27
pppppppppppppppppppppppppppppppppppppppppppppppppppppp pppppppppppppppppppppppppppppppppppppppppppppppppppppp pppppppppppppppppppppppppppppppppppppppppppppppppppppp
$15,873 $14,238 $12,722 +11 +12
(1) Includes the sale of engine noise reduction kits.