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FedEx Corporation 2001 Annual Report
FedEx Corporation 2001 Annual Report

Table of contents

  • Page 1
    FedEx Corporation 2001 Annual Report

  • Page 2
    ... "overnight" success. Today, only FedEx offers dedicated networks for express, ground, freight, expedited delivery and unique trade services - when customers need greater choice and ï¬,exibility in managing their supply chains. Only FedEx delivers industry-leading, on-time service levels - when time...

  • Page 3
    ... (1) Nonrecurring items include primarily noncash charges of $124 million ($78 million after tax or $0.27 per diluted share) associated with the curtailing of certain aircraft modification and development programs and reorganizing operations at FedEx Supply Chain Services, Inc. (2) Net income plus...

  • Page 4
    ... FedEx Home Delivery make e-commerce history with first-day delivery of 250,000 Harry Potter books for Amazon.com. July 31 FedEx Custom Critical acquires Passport Transport. Sept 12 FedEx Express signs a European operational agreement with La Poste. Sept 18 FedEx Ground opens Northeast Super Hub...

  • Page 5
    ...FedEx Home Delivery coverage to 70% of the U.S. population. Mar 23 FedEx Ground awarded ISO 9002 registration, joining FedEx Express and FedEx Services as a bearer of the worldwide ISO quality standard. Apr 18 FedEx Ground, American Freightways and Viking Freight win NASSTRAC's Carrier of the Year...

  • Page 6
    ... Postal Service business alliance is the advanced technology that will allow FedEx to scan and read postal bar codes. It's in keeping with our customer-focused technology - helping our customers link seamlessly to the FedEx system and use information to help manage their business. The FedEx Web site...

  • Page 7
    ... with the most reliable service in the industry. The FedEx technology network enables real-time information to help customers manage supply and demand on a global scale. And, on a personal note, let me add that FedEx has the best human network anywhere - a culture long recognized as a great place...

  • Page 8
    ...scal year 2001 as our new go-to-market strategies generated volume and yield growth at FedEx Express and FedEx Ground. The second half of the year was more financially challenging, however, as our package business was severely impacted by a rapidly slowing economy, particularly in the high-tech and...

  • Page 9
    ...of American Freightways, which added approximately $630 million to 2001 revenues. Excluding the effects of business acquisitions in both years, revenues increased 3% for 2001. This increase is largely due to the continued revenue growth of FedEx Express International Priority (IP) packages, although...

  • Page 10
    ... goodwill. FedEx Freight also includes Viking. The acquisition of American Freightways was slightly accretive to 2001 earnings per diluted share. For further information regarding the acquisition, see "Liquidity" and Note 2 to our financial statements. Our compensation programs include substantial...

  • Page 11
    ...rates and unrealized market declines in pension assets. Despite the near-term economic outlook, we continue to believe that we are well positioned for long-term growth. In January 2001, FedEx Express entered into a business alliance with the U.S. Postal Service, which is expected to generate revenue...

  • Page 12
    ...Reportable Segments" above. (2) The U.S. overnight box category includes packages exceeding 8 ounces in weight. (3) The U.S. overnight envelope category includes envelopes weighing 8 ounces or less. (4) Includes $93 million charge for impairment of certain assets related to the MD10 aircraft program...

  • Page 13
    ... Postal Service agreements, are expected to increase revenues in 2002. Operating margin for this segment is expected to decrease in 2002 (excluding the 2001 charges related to aircraft programs), as increased pension and health care costs, costs associated with new services and annual wage increases...

  • Page 14
    ... of FedEx Home Delivery and the rebranding and reorganization initiatives. Depreciation expense increased 20% in 2000 as new terminal facilities were opened late in 1999 and throughout the first half of 2000. The FedEx Home Delivery service, dedicated to meeting the needs of business-to-consumer...

  • Page 15
    ...cost structure, service and customer satisfaction levels. OTHER OPERATIONS Other operations include FedEx Custom Critical, a critical-shipment carrier; FedEx Trade Networks, a global trade services company; FedEx Supply Chain Services, a contract logistics provider; and certain unallocated corporate...

  • Page 16
    ... FedEx Supply Chain Services. The new FedEx Supply Chain Services business model includes substantially less emphasis on warehousing activities and an increased focus on alliance-based and information technology-sensitive business. The new business model is more consistent with management's strategy...

  • Page 17
    ...level of 2001 capital expenditures. We plan to continue to make strategic capital investments, particularly in information technology and ground network expansion, in support of our long-term growth goals. For information on our purchase commitments, see Note 13 to our financial statements. We have...

  • Page 18
    ...to time in our Securities and Exchange Commission filings and press releases. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Except as otherwise indicated, any reference to a year means our...

  • Page 19
    ... and employee benefits Purchased transportation Rentals and landing fees Depreciation and amortization Fuel Maintenance and repairs Other OPERATING INCOME OTHER INCOME (EXPENSE) Interest, net Other, net INCOME BEFORE INCOME TAXES PROVISION FOR INCOME TAXES NET INCOME EARNINGS PER COMMON SHARE...

  • Page 20
    ... Goodwill Equipment deposits and other assets Total other assets LIABILITIES AND STOCKHOLDERS' INVESTMENT CURRENT LIABILITIES Current portion of long-term debt Accrued salaries and employee benefits Accounts payable Accrued expenses Total current liabilities LONG-TERM DEBT, LESS CURRENT PORTION...

  • Page 21
    ... accounts Aircraft related impairment charges Deferred income taxes and other noncash items Gain from disposals of property and equipment Changes in operating assets and liabilities, net of the effects of businesses acquired: Decrease (increase) in receivables (Increase) decrease in other current...

  • Page 22
    ...Purchase of treasury stock Two-for-one stock split by FedEx Corporation in the form of a 100% stock dividend (148,931,996 shares) Employee incentive plans and other (1,770,626 shares issued) Amortization of deferred compensation... are an integral part of these consolidated financial statements. 20

  • Page 23
    ... chain management services, whose operations are primarily represented by Federal Express Corporation ("FedEx Express"), the world's largest express transportation company; FedEx Ground Package System, Inc. ("FedEx Ground"), North America's second largest provider of small-package ground delivery...

  • Page 24
    ... value. See Notes 15 and 16 for information concerning the impairment charges recognized in 2001. GOODWILL. Goodwill is recognized for the excess of the purchase price over the fair value of tangible and identifiable intangible net assets of businesses acquired. It is amortized over the estimated...

  • Page 25
    ... 9, 2001, American Freightways was merged into a newly-created subsidiary of FedEx and each remaining outstanding share of American Freightways common stock was converted into 0.6639 shares of common stock of FedEx. The excess purchase price over the estimated fair value of the net assets acquired...

  • Page 26
    ... and $1,063,000,000 at May 31, 2001 and 2000, respectively, compared with fair values of approximately $1,999,000,000 and $1,055,000,000 at those dates. The estimated fair values were determined based on quoted market prices or on the current rates offered for debt with similar terms and maturities...

  • Page 27
    ... may be granted to certain key employees (and, under the 1997 plan, to directors who are not employees) to purchase shares of common stock at a price not less than its fair market value at the date of grant. Options granted have a maximum term of 10 years. Vesting requirements are determined at...

  • Page 28
    ...of our Restricted Stock Plans, shares of common stock are awarded to key employees. All restrictions on the shares expire over periods varying from two to five years from their date of award. Shares are valued at the market price at the date of award. Compensation related to these plans is recorded...

  • Page 29
    .... International defined benefit pension plans provide benefits primarily based on final earnings and years of service and are funded in accordance with local laws and income tax regulations. Plan assets consist primarily of marketable equity securities and fixed income instruments. In 2001...

  • Page 30
    ..., 2001. The name of the newly merged plan is the FedEx Corporation Employees' Pension Plan. No pension benefit formulas were changed as a result of the merger. POSTRETIREMENT HEALTH CARE PLANS. FedEx Express and FedEx Corporate Services, Inc. ("FedEx Services") offer medical and dental coverage to...

  • Page 31
    ... $23,676 16,962 - (211) - $40,427 WEIGHTED-AVERAGE ACTUARIAL ASSUMPTIONS 2001 Pension Plans 2000 1999 2001 Postretirement Health Care Plans 2000 1999 Discount rate Rate of increase in future compensation levels Expected long-term rate of return on assets 7.7% 4.0 10.9 8.5% 5.0 10.9 7.5% 4.6 10...

  • Page 32
    ... financial statement totals: In thousands 2001 2000 1999 The following table presents revenue by service type and geographic information for the years ended or as of May 31: In thousands REVENUE BY SERVICE TYPE 2001 2000 1999 Revenues FedEx Express FedEx Ground FedEx Freight Other Consolidated...

  • Page 33
    ... above table. FedEx Express has entered into agreements with two airlines to acquire 53 DC10 aircraft (49 of which had been received as of May 31, 2001), spare parts, aircraft engines and other equipment, and maintenance services in exchange for a combination of aircraft engine noise reduction kits...

  • Page 34
    ...,000 charge is comprised primarily of the write-off of deposits for aircraft purchases. Capitalized interest and other costs estimated to be unrecoverable in connection with the bankruptcy of Ayres Corporation were also expensed. NOTE 16: OTHER EVENTS On April 24, 2001, FedEx Supply Chain Services...

  • Page 35
    ... and the related consolidated statements of income, changes in stockholders' investment and comprehensive income and cash ï¬,ows for each of the three years in the period ended May 31, 2001. These financial statements are the responsibility of FedEx's management. Our responsibility is to express an...

  • Page 36
    ... charges of $102,000,000 ($64,770,000, net of tax) at FedEx Express and reorganization costs of $22,000,000 ($13,530,000, net of tax) at FedEx Supply Chain Services were recorded in 2001. See Notes 15 and 16 of Notes to Consolidated Financial Statements included elsewhere herein. In connection...

  • Page 37
    ... Group Venture capital firm Robert L. Cox(1) Partner Waring Cox Law firm Ralph D. DeNunzio(2 *) President Harbor Point Associates, Inc. Private investment and consulting firm Judith L. Estrin(3 *) President and Chief Executive Officer Packet Design, Inc. Internet technology company F. Sheridan...

  • Page 38
    ...ficer, Viking Freight, Inc. Kenneth R. Masterson Executive Vice President, General Counsel and Secretary T. Michael Glenn Executive Vice President, Market Development and Corporate Communications James S. Hudson Corporate Vice President and Chief Accounting Officer FEDEX GROUND Daniel J. Sullivan...

  • Page 39
    ... Hours,SM FedEx Global Trade Manager,SM the FedEx Express,SM FedEx Ground,SM FedEx Custom Critical,SM Fedex Freight,SM FedEx Trade NetworksSM and FedEx ServicesSM logos are service marks of Federal Express Corporation. Used under license. Viking is a service mark of Viking Freight, Inc. and American...

  • Page 40
    FedEx Corporation 942 South Shady Grove Road Memphis, Tennessee 38120 fedex.com