Federal Express 2006 Annual Report Download - page 77

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
75
Amortization expense for intangible assets was $25 million in
2006, $26 million in 2005 and $14 million in 2004. Estimated amorti-
zation expense for the next five years is as follows (in millions):
2007 $23
2008 21
2009 18
2010 16
2011 8
NOTE 5: BUSINESS REALIGNM ENT COSTS
During the first half of 2004, voluntary early retirement incentives
with enhanced pension and postretirement healthcare benefits
were offered to certain groups of employees at FedEx Express
who were age 50 or older. Voluntary cash severance incentives
were also offered to eligible employees at FedEx Express.
Approximately 3,600 employees accepted offers under these pro-
grams. Costs were also incurred for the elimination of certain
management positions, primarily at FedEx Express and FedEx
Services. We recognized $435 million of business realignment
costs during 2004 ($428 million related to the FedEx Express
Segment). No material costs for these programs were incurred
in 2006 or 2005. At both May 31, 2006 and May 31, 2005, business
realignment related accruals were immaterial.
NOTE 6: SELECTED CURRENT LIABILITIES
The components of selected current liability captions were as
follows (in millions): May 31,
2006 2005
Accrued Salaries and Employee Benefits
Salaries $ 236 $ 202
Employee benefits 655 658
Compensated absences 434 415
$1,325 $1,275
Accrued Expenses
Self-insurance accruals $ 523 $ 483
Taxes other than income taxes 305 288
Other 562 580
$1,390 $1,351
NOTE 7: LONG-TERM DEBT AND OTHER FINANCING
ARRANGEM ENTS
The components of our long-term debt were as follows (in millions):
May 31,
2006 2005
Unsecured debt $2,006 $2,255
Capital lease obligations 310 401
Other debt, interest rates of 4.03% to 9.98%
due through 2008 126 140
2,442 2,796
Less current portion 850 369
$1,592 $2,427
From time to time, we finance certain operating and investing
activities, including acquisitions, through borrowings under our
$1.0 billion revolving credit facility or the issuance of commercial
paper. In July 2005, we executed a new $1.0 billion five-year
revolving credit facility, which replaced and consolidated our prior
revolving credit facilities. Borrowings under the credit facility will
bear interest at short-term interest rates (based on the London
Interbank Offered Rate (“LIBOR” ), the Prime Rate or the Federal
Funds Rate) plus a margin dependent upon our senior unsecured
long-term debt ratings. The revolving credit agreement contains
certain covenants and restrictions, none of which are expected
to significantly affect our operations or ability to pay dividends.
Our commercial paper program is backed by unused commit-
ments under the revolving credit facility and borrowings under the
program reduce the amount available under the credit facility. At
May 31, 2006, no commercial paper borrowings were outstanding
and the entire amount under the credit facility was available.
The components of unsecured debt (net of discounts) were as
follows (in millions): M ay 31,
2006 2005
Senior unsecured debt
Interest rate of 7.80%, due in 2007 $ 200 $ 200
Interest rate of 2.65%, due in 2007 500 500
Interest rate of 3.50%, due in 2009 500 499
Interest rate of 7.25%, due in 2011 249 499
Interest rate of 9.65%, due in 2013 300 299
Interest rate of 7.60%, due in 2098 239 239
Other notes, due in 2007 18 19
$2,006 $2,255