Federal Express 2001 Annual Report Download - page 27

FedEx Corporation
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Rent expense under operating leases for the years ended May 31
was as follows:
In thousands 2001 2000 1999
Minimum rentals $1,398,620 $1,298,821 $1,246,259
Contingent rentals 91,230 98,755 59,839
$1,489,850 $1,397,576 $1,306,098
Contingent rentals are based on hours flown under supplemental
aircraft leases.
A summary of future minimum lease payments under capital
leases and noncancellable operating leases (principally aircraft
and facilities) with an initial or remaining term in excess of one
year at May 31, 2001 is as follows:
Capital Operating
In thousands Leases Leases
2002 $ 15,416 $ 1,246,936
2003 15,279 1,134,413
2004 15,132 1,043,549
2005 15,044 981,777
2006 15,040 916,084
Thereafter 274,665 9,040,570
$350,576 $14,363,329
At May 31, 2001, the present value of future minimum lease pay-
ments for capital lease obligations, including certain tax-exempt
bonds, was $202,107,000.
FedEx Express makes payments under certain leveraged operating
leases that are sufficient to pay principal and interest on certain
pass-through certificates. The pass-through certificates are not
direct obligations of, or guaranteed by, us or FedEx Express.
NOTE 6: PREFERRED STOCK
The Certificate of Incorporation authorizes the Board of Directors,
at its discretion, to issue up to 4,000,000 shares of Series Preferred
Stock. The stock is issuable in series, which may vary as to cer-
tain rights and preferences, and has no par value. As of May 31,
2001, none of these shares had been issued.
NOTE 7: COMMON STOCKHOLDERS’ INVESTMENT
Treasury Shares
During 2000, we purchased 15,208,356 treasury shares. Of these
shares, 15,000,000, or approximately 5% of our outstanding shares
of common stock, were purchased under a stock repurchase pro-
gram at an average cost of $39.75 per share. Approximately
11,000,000 of the shares held in treasury were reissued February
9, 2001, for the acquisition of American Freightways. During 2001
and 2000, treasury shares were also utilized for issuances under
the stock compensation plans discussed below. At May 31, 2001,
and 2000, respectively, 1,244,490 and 14,128,998 shares remained
in treasury.
Stock Compensation Plans
Options and awards outstanding under stock-based compen-
sation plans at May 31, 2001 are described below. As of May 31,
2001, 25,880,128 shares of common stock were reserved for
issuance under these plans. The Board of Directors has author-
ized the repurchase of common stock necessary for grants or
option exercises under these stock plans.
Accounting Principles Board Opinion No. 25, “Accounting for
Stock Issued to Employees,” and related interpretations is
applied to measure compensation expense for stock-based com-
pensation plans. If compensation cost for stock-based compen-
sation plans had been determined under SFAS 123, “Accounting
for Stock-Based Compensation,” net income and earnings per
share would have been the pro forma amounts indicated below:
In thousands, except per share amounts 2001 2000 1999
Net income:
As reported $584,371 $688,336 $631,333
Pro forma 553,033 659,601 609,960
Earnings per share, assuming dilution:
As reported $1.99 $2.32 $ 2.10
Pro forma 1.89 2.23 2.03
Fixed Stock Option Plans
Under the provisions of our stock incentive plans, options 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 the discretion of the
Compensation Committee of the Board of Directors. Presently,
option vesting periods range from one to eight years. At May 31,
2001, there were 7,218,032 shares available for future grants
under these plans.
Beginning with the grants made on or after June 1, 1995, the fair
value of each option grant was estimated on the grant date using
the Black-Scholes option-pricing model with the following
assumptions for each option grant:
2001 2000 1999
Dividend yield 0% 0% 0%
Expected volatility 35% 30% 25%
Risk-free interest rate 4.3%–6.5% 5.6%–6.8% 4.2%–5.6%
Expected lives 2.5–5.5 years 2.5–9.5 years 2.5–5.5 years