Federal Express 1998 Annual Report Download - page 48

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P46 FDX CORPORATION
The Company’s operations included the following income (loss) with respect to entities in foreign locations for the
years ended May 31:
In thousands
1998 1997 1996
Entities with pre-tax income $ 208,000 $ 205,000 $ 153,000
Entities with pre-tax losses (306,000) (191,000) (236,000)
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$ (98,000) $ 14,000 $ (83,000)
A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate for the years
ended May 31 is as follows:
1998 1997 1996
Statutory U.S. income tax rate 35.0% 35.0% 35.0%
Increase resulting from:
Goodwill amortization 0.5 0.9 1.0
Foreign operations 0.8 0.7 1.7
State and local income taxes, net of federal benefit 2.7 2.9 2.6
Other, net 2.5 3.5 2.7
Non-recurring items (Caliber acquisition 1998,
Viking restructuring 1997) 3.1 10.9 —
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Effective tax rate 44.6% 53.9% 43.0%
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Effective tax rate (excluding non-recurring items) 41.5% 43.0% 43.0%
The significant components of deferred tax assets and liabilities as of May 31 were as follows:
In thousands
1998 1997
Deferred Deferred Deferred Deferred
Tax Assets Tax Liabilities Tax Assets Tax Liabilities
Depreciation $ — $523,843 $ — $429,350
Deferred gains on sales of assets 86,053 — 83,413 —
Employee benefits 126,513 22,595 88,467 18,830
Self-insurance reserves 204,303 — 196,684 —
Other 183,941 95,729 189,986 95,246
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$600,810 $642,167 $558,550 $543,426
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income taxes have been provided for foreign operations
based upon the various tax laws and rates of the coun-
tries in which the Company’s operations are conducted.
There is no direct relationship between the Company’s
overall foreign income tax provision and foreign pre-tax
book income due to the different methods of taxation
used by countries throughout the world.
NOTE 10: PENSION AND PROFIT SHARING PLANS
The Company sponsors defined benefit pension plans
covering substantially all employees. The largest plans
cover U.S. domestic employees age 21 and over, with
at least one year of service and provide benefits based
on final average earnings and years of service. Plan
funding is actuarially determined, subject to certain tax
law limitations.
International defined benefit pension plans provide ben-
efits primarily based on final earnings and years of
service and are funded in accordance with local laws
and income tax regulations.