Federal Express 1998 Annual Report Download - page 50

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P48 FDX CORPORATION
The following table sets forth the accrued postretirement benefit cost as of May 31:
In thousands
1998 1997
Accumulated postretirement benefit obligation:
Retirees $ 52,559 $ 46,469
Fully eligible active employees 44,141 42,221
Other active employees, not fully eligible 120,327 95,844
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217,027 184,534
Unrecognized net gain 13,531 29,291
Unrecognized prior service benefit 1,477 —
pppppppppppppppppppppppppppppppppppppppppppppppppppppp pppppppppppppppppppppppppppppppppppppppppppppppppppppp
$232,035 $213,825
Net postretirement benefit cost for the years ended May 31 was as follows:
In thousands
1998 1997 1996
Service cost $18,385 $17,830 $13,608
Interest cost 14,767 13,663 12,577
Amortization of accumulated gains (619) (252) (802)
Amortization of unrecognized prior service benefit (90) — —
pppppppppppppppppppppppppppppppppppppppppppppppppppppp pppppppppppppppppppppppppppppppppppppppppppppppppppppp pppppppppppppppppppppppppppppppppppppppppppppppppppppp
$32,443 $31,241 $25,383
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FedEx’s future medical benefit costs were estimated to
increase at an annual rate of 9.5% during 1999,
decreasing to an annual growth rate of 5.25% in 2008
and thereafter. Future dental benefit costs were esti-
mated to increase at an annual rate of 8.0% during
1999, decreasing to an annual growth rate of 5.25%
in 2010 and thereafter. FedEx’s cost is capped at150%
of 1993 employer cost and, therefore, will not be sub-
ject to medical and dental trends after the capped cost
is attained, projected to be in 2000. Caliber’s health
care costs were estimated to increase at an annual
rate of 8.5% during 1999, decreasing to an annual
growth rate of 5.25% in 2005 and thereafter. Primar-
ily because of the cap on FedEx’s cost, a1% increase in
these annual trend rates would not have a significant
impact on the accumulated postretirement benefit
obligation of the Company at May 31, 1998, or 1998
benefit expense. The weighted-average dis-
count rates used in estimating the accumulated post-
retirement benefit obligation were 7.2% and 7.8% at
May 31, 1998 and 1997, respectively. The Company
pays claims as incurred.
NOTE 12: BUSINESS SEGMENT INFORMATION
The Company is primarily composed of the operations of
FedEx and RPS, Inc. (“RPS”). FedEx is in a single line of
business — the worldwide express transportation and
distribution of goods and documents. RPS is a ground
small-package carrier. The operations represented in
the Other category are also in the transportation indus-
try and include Viking Freight, Inc. (“Viking”), a regional
freight carrier, Caliber Logistics, Inc., a contract logis-
tics provider and Roberts Express, Inc., a surface expe-
dited carrier.
For reporting purposes, operations for FedEx are classi-
fied into two geographic areas, U.S. domestic and inter-
national. Shipments which either originate in or are
destined to locations outside the United States are cate-
gorized as international.